KUALA LUMPUR (Nov 13): Headline inflation recorded a smaller contraction of 1.4% in the third quarter (3Q) of 2020, versus a 2.6% contraction in 2Q, mainly due to higher domestic retail fuel prices, in line with the recovery in global oil prices.
Core inflation, on the other hand, moderated slightly to 1% in 3Q amid lower rental and accommodation inflation, compared with 1.2% in 2Q, according to Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus during a virtual press conference today on the country's 3Q economic performance.
“In line with earlier assessments, headline inflation is likely to average negative this year, given the substantially lower global oil prices,” said Nor Shamsiah.
Going forward, Nor Shamsiah said BNM is projecting that headline inflation will average higher at between 1% to 3% in 2021, primarily reflecting the higher projected global oil prices and the impact lapse from the tiered electricity tariff rebate in 2020.
Core inflation, meanwhile, will remain subdued amid spare capacity in the economy.
“The outlook for inflation trajectory will mainly depend on global oil and commodity price developments,” said Nor Shamsiah.
Malaysia's inflation declined 1.4% in September 2020 from a year earlier, according to the Department of Statistics Malaysia last month, which marked the eighth consecutive month that the country has experienced deflation.
On this, Nor Shamsiah said the current episode of negative headline inflation is not an outright deflation as it primarily reflects the impact of lower global oil prices and is not unique to Malaysia.
“In the case of Malaysia, price decline in the CPI (consumer price index) basket is not pervasive and inflation expectation remains well anchored,” she said, adding that deflationary pressures are also relatively contained as there are sustained credit intermediation and relief measures help to contain defaults.
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