KUALA LUMPUR (Oct 29): Malaysia's inflation, measured by the consumer price index (CPI), is expected to moderate from current levels to 2.1% next year, following better economic prospects and stable crude oil prices.

In 2022, consumption demand for goods and services by households is expected to be supported by expectations of improved employment conditions, while the projected growth in private investment activities and the implementation of the 12th Malaysia Plan will further augment domestic demand, said the 2021/22 Economic Report released on Friday.

In the first eight months of 2021, CPI, which is based on a weighted average market basket of consumer goods and services, rose by 2.3% and is expected to continue for the rest of the year. For full-year 2021, inflation is expected to come in at 2.4%.

"The reversal from deflation in 2020 (of 1.2%) was due to higher pump prices of RON97, RON95 and diesel, following escalating global crude oil prices, albeit lower electricity charges owing to the bill discounts given under the government's stimulus packages," the report said.

Meanwhile, the country's producer price index (PPI) is also set to stabilise next year on anticipated recovery of the domestic and global economies.

Between January and August 2021, PPI by local production increased by 8.2% and is expected to remain stable throughout the year due to the normalisation of input costs.

“The growth is attributed to higher global commodity prices, particularly crude oil and natural gas,” said the report.

By sector, the surge in PPI was particularly contributed by a significant increase in agriculture, forestry and fishing (36.6%), followed by mining (30.2%), manufacturing (4.3%) and water supply (0.7%) sectors. The index for electricity and gas supply, however, dropped by 0.7% in the same period.

For more stories on the Economic Report 2021/2022, click here.