Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on January 22, 2020

KUALA LUMPUR: Malaysia’s overall inflation for December 2019 is expected to accelerate to 1.2% compared with 0.9% in the preceding month, said RAM Rating Services Bhd. “This is primarily due to a larger contribution from the food component amid low-base effects from the previous year,” RAM said in a statement.

For 2019, RAM expects the overall inflation at 0.7%, compared with 1% for 2018. RAM has lowered its inflation forecast for 2020 to 1.7%, from 1.9%. RAM explained the lowered forecast is due to the government’s recent decision to delay the targeted fuel subsidy programme’s commencement, which would have raised consumer fuel prices to market levels effective Jan 1.

“As such, the transport component’s contribution to inflation would likely be lower than initially envisaged, reining in the overall inflation. Our forecast assumes the subsidy programme will only begin in 2H (the second half) of 2020 at the earliest, given the registration of eligible M40 (middle 40%) [income-group] recipients will only take place in 2Q (the second quarter),” it said.

RAM noted rising tensions in the Middle East created an upward pressure on global crude oil prices, but maintained it is unlikely to impact Malaysia’s inflation in 1H given the targeted fuel subsidy programme’s delayed implementation. “Moreover, a prolonged price spike spilling into 2H is unlikely given Opec members’ surplus capacities. As such, we have not built in this scenario in our forecast for 2020,” it added.

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