Positive Real Wage Growth to Continue Fueling Strong Consumer Spending

As the economy continues to recover from the pandemic, all segments registered improving trends especially those with low base effects and real wage growth is encouraging

Positive Real Wage Growth to Continue Fueling Strong Consumer Spending
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Malaysia’s labour market stayed resilient despite pandemic-led crisis in 2020 and the positive real wage growth will continue to impact the strong consumer spending in the country.

Total employment only fell by -0.1% during the year, mainly dragged by declines in employers (-13.1%) and own-account workers (-5.8%). On the other hand, employees, which make up about 76% of total employment, grew by +1.7%, and unpaid-family workers increased by +4.9%.

By structure, employee’s share continued to strengthen hitting new peak at 77.4% of total employment in 2021. The employers’ share was however maintained at the range of 3~4%; whereas the share for own-account and unpaid-family workers descended to new lows at 16.4% and 3%, respectively, last year.

Real Wage Growth

"Based on this trend, we conclude the strong labour demand in the post-pandemic recovery led to more people securing jobs as employees when they returned and entered the job market," analysts say.

As the economy continues to recover from the pandemic, all segments registered improving trends especially those with low base effects. Consequently, employees, the backbone of the economy, expanded steadily, dominating more than three-thirds of the workforce. We op

Employee’s share remained strong despite pandemic crisis and Malaysia’s labour market stayed resilient despite pandemic-led crisis in 2020. Total employment only fell by -0.1% during the year, mainly dragged by declines in employers and own-account workers.

"Wage recipients to employment ratio reached new peak in 2021. Based on the latest salaries & wages 2021 survey, we found that wage recipients to employment ratio hit new record high at 64.5% last year. The ratio hit bottom point in 2013 and gradually picked up since then," says MIDF.

Household debt to GDP ratio declined closer to pre-pandemic level. Despite the increased borrowings, the ratio of household debt to GDP has been on a decline. As of 1HCY22, the ratio improved further and fell to 84.5% of GDP, still higher than but closer to the pre-pandemic level (2019: 82.8%).

Moving into 2023 - Growth Forecast

Considering external headwinds and tightening monetary policy in many economies, we foresee Malaysia’s GDP growth to moderate to +4.2% for next year.

Supply-push inflation factors to soften next year. Moving into 2023, supply-push factors on inflation are expected to soften among others underpinned by appreciation of USDMYR, moderation in food prices, further easing in global supply chain pressure and relatively lower commodity prices.

"We forecast private consumption to expand by +6.6% in 2023. Malaysia’s consumer spending is expanding strongly as reflected in retail trade sales growth of +23.2%yoy in 8MCY22.

"Underpinned by positive real wage growth, improving labour market, stable inflationary pressure and fiscal incentives, private consumption is projected to grow by +6.6% for 2023," MIDF says.