Volume cigarette sales in Malaysia, which began to stabilize in the third quarter of 2017, are expected to be maintained at the start of 2018, barring any market shocks, according to a story in The Edge Financial Daily quoting analysts.
In part, this stability will be underpinned by a stronger economy that is said to be delivering increased disposable incomes.
The local cigarette industry has been hit hard in recent times by the illegal trade, which has been boosted by tax-driven retail price increases on licit products.
“We think demand should improve as disposable income improves alongside economic growth,” Vincent Khoo, UOB Kay Hian’s head of research for Malaysia, was said to have told the Daily by email. “While tobacco is arguably more of a [consumer] discretionary rather than a necessity, an improved economy should trickle down to better tobacco consumption, provided there is no hike in duties or prices.”
Khoo said he believed it was unlikely that the government would raise excise-duty rates because this would lead to a fall in the government’s revenue.
Based on the finance ministry’s third-quarter 2017 report on the Malaysian economy, indirect tax collection dropped 7.3 percent to RM14.6 billion, from RM15.7 billion during the third quarter of 2016 due to excise-duty collection being down 26.4 percent, largely because of a fall in the sale of locally manufactured cigarettes.
Better times ahead
