Economy, politics spell gloomy outlook in Malaysia

International brands beat out local competition as economic jitters, currency woes and political uncertainty point to a challenging year for the Malaysian industry.

International brands top the list this year for Malaysia, with the top five being Samsung, Nestlé, Sony, Panasonic and Apple—in that order. The top-performing home-grown brand is AirAsia, coming in at seventh place.

While the top brands remain the same, there’s been a slight shuffle in the rankings from last year with Sony dropping down to third and Nestlé moving up while Panasonic climbs up to fourth and Apple dips down to fifth place.

Brands are operating in a country that has not had a good year, with 2015 marking the introduction of a goods-and-services tax, public transport hikes and numerous other cost increases.

This has all been made worse by a declining ringgit that has lost nearly a quarter of its value against the US dollar over the year after dropping eight percent in 2014.

In November, Nielsen reported that Malaysian consumer confidence had dropped to a 10-year low, driven mainly by increased concerns about the economic outlook, the currency woes and growing uncertainty over the country's political stability.

External factors, including declining oil prices, China's slowing economy and US interest rate hikes, do not favour the Malaysian economy.

The government’s oil and gas income—which accounted for 31 percent of total government revenue in 2014—has been suppressed by lower oil prices, which have partly offset the benefits to public finances due to the recent removal of fuel subsidies and the introduction of the sales tax. 

In response, Malaysia revised the local economic growth to be between 4.5 percent and 5.5 percent in 2015, and 4 percent and 5 percent in 2016.

Investor disquiet has deepened as an ongoing scandal around the lack of transparency with the Malaysian state investment fund hangs over all these developments. The 1MDB has racked up US$13.1 billion in debts and made controversial deposits of some US$700 million into the personal bank accounts of Prime Minister Najib Razak.

Marketers are in for more of the same, as industry players expect single-digit growth in advertising expenditure (adex). Advertisers of discretionary products such as quick-service restaurants, lifestyle and fashion products, tourism and entertainment are likely to see greater adverse impact.

According to Nielsen figures, the market’s adex extended its decline in October, dropping marginally to RM1.1 billion (US$282.5 million) from RM1.23 billion (US$315.9 million) in the corresponding period the previous year as cautious sentiment continued to suppress ad spend.