A low unemployment rate, rising disposable incomes and a strong tourism industry are helping to drive growth in Malaysia's retail sector. We forecast that total retail sales will grow from MYR200.84bn (US$57.02bn) in 2012 to MYR248.33bn (US$70.50bn) in 2016.

Malaysia's nominal GDP is forecast to be US$274.34bn in 2012, and BMI forecasts average annual GDP growth of 4.1% over the forecast period through to 2016. With the population expected to increase to 31mn by 2016, GDP per capita is predicted to rise 48.6%, from US$9,356 in 2012 to US$13,901 in 2016. Malaysia is classified as an upper-middle income country by the World Bank, with the proportion of middle-income households estimated at more than 50% in 2007. According to the Department of Statistics Malaysia, urban households on average spent 1.8 times more than rural households between 2004 and 2005. Average consumer spending was MYR2,285 a month in urban areas and MYR1,301 per month in rural areas. With the urban population predicted to account for almost 76% of the total by 2015, according to UN data, this is likely to have a positive effect on retail sales.

BMI forecasts pharmaceutical sales of US$0.45bn in 2012, set to increase to US$0.66bn in 2016, a rise of 44.5%.

Consumer electronic sales are predicted to rise from US$11.47bn in 2012 to US$14.44bn in 2016 (+25.8%), boosted by demand from the tech-literate urban middle class and by a growing interest in electronic products from the underpenetrated areas outside the Klang Valley.

BMI food consumption data suggest that the food and drink retail segment will have a market share of 31.7% in 2012. The sector is forecast to be worth US$18.08bn in 2012, and sales are expected to grow to US$23.17bn by 2016. Our forecasts suggest a 32.9% share of the total retail market in 2016. Per capita food consumption is forecast to be US$743 in 2016, which is impressive for the region.

Although Malaysia is increasingly one of emerging Asia's more established mass grocery retail markets, BMI continues to predict a bright medium-term future for the sector, with industry sales forecast to reach US$24.12bn in 2016 on the back of the country's growing affluent middle- and upper-income consumer base.

Tourism is an important contributor to the retail sector. Malaysia registered 24.6mn arrivals and tourism receipts of MYR56.5bn (US$18.5bn) in 2010, surpassing the government's target of 24mn arrivals and MYR54bn in tourism revenue, according to a statement from Tourism Malaysia. For 2011, the Tourism Ministry was targeting 25mn arrivals and MYR60bn in tourism receipts.

Retail sales for the BMI grouping of Asian countries in 2012 are a forecast US$3.78trn. China and India are predicted to account for nearly 92% of regional retail sales in 2012, and by 2016 their share of the regional market is expected to be more than 92%. Growth in regional retail sales for 2012-2016 is forecast by BMI at 31.2%, an annual average of 9.0%. India will likely experience the most rapid rate of growth, followed by Singapore. Malaysia's forecast market share of 1.5% in 2012 is expected to decrease slightly, to 1.4%, by 2016.

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