KUALA LUMPUR, Sept 9 — Malaysia’s expanded fuel subsidy programmes and targeted cash handouts have helped cushion consumers and small businesses from the sharpest impacts of rising living costs, according to the Malaysia Retail Industry Report for September 2026.

The quarterly report, published by Retail Group Malaysia (RGM) based on a survey of members from the Malaysia Retailers Association (MRA) and Malaysia Retail Chain Association (MRCA), noted that targeted fuel assistance has played a crucial role in stabilising operational overheads.

In particular, the Budi Diesel scheme, rolled out on July 1, has assisted small and medium enterprises (SMEs) by allowing eligible motorists to purchase subsidised B10 diesel at RM2.10 per litre, significantly lower than the market pump price of roughly RM4.72 per litre recorded in late August.

Around 500,000 private diesel vehicle owners have registered under the scheme, with the government subsequently broadening eligibility to cover company-registered pick-up trucks and commercial utility vehicles used for daily business operations.

The report also credited the broader Budi95 petrol subsidy with keeping domestic inflation “partly under control,” noting that RON95 petrol prices have remained capped at RM1.99 per litre for more than 16 million motorists since September last year.

On August 30, the prime minister announced further enhancements taking effect from September 1: the monthly Budi Diesel allocation for approved pick-up truck and jeep users rose from 300 to 400 litres, while the Budi95 monthly quota expanded from 200 to 300 litres.

RGM framed the subsidy expansion as a necessary intervention against escalating global pressures stemming from Middle East conflicts, which have driven up consumer prices across food, vehicle maintenance, insurance premiums, and commercial air travel.

Cash aid cushions household budgets

Direct cash assistance has similarly bolstered everyday purchasing power. Allocations for Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) rose to a combined RM15 billion for 2026, up from RM13 billion in 2025, providing critical liquidity for lower-income B40 households. Following the disbursement of Phase 3 payments on August 15, a final distribution round is scheduled for October.

These interventions come against a subdued retail landscape. The retail sector grew by just 2.5 per cent year-on-year in the second quarter, falling well short of the 4.8 per cent expansion projected by retailers in June.

The figure also lagged behind the broader economy’s 6.0 per cent gross domestic product (GDP) growth, which was propelled primarily by robust electronics exports and data centre investments.

Average inflation climbed to 1.9 per cent during the quarter, with transport, personal care, and financial services recording the steepest price increases.

Shifting consumer behaviour

Faced with persistent price pressures, Malaysian shoppers have noticeably modified their spending habits. Consumers made fewer retail visits, compared prices more aggressively, prioritized discounted or house-brand products over premium labels, and shifted more discretionary spending online.

Many households also scaled back on personal care services, beauty treatments, and cinema outings, while opting for domestic holidays over overseas travel.

Despite the sluggish second quarter, RGM maintained its full-year retail growth projection of 3.8 per cent for 2026, anticipating a stronger rebound in the third quarter.

Retailers themselves remain optimistic, forecasting 4.7 per cent growth between July and September, supported by domestic travel activity and major events.

RGM added that the full economic benefits of the widened fuel subsidies and the final October STR disbursement will likely be felt as retailers head into the year-end festive and school holiday shopping season.