KUALA LUMPUR (Jan 21): Malaysia's overall inflation rate for December 2019 is expected to accelerate to 1.2% compared with 0.9% in the preceding month, says 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 today.

For 2019 as a whole, RAM expects the overall inflation rate to be 0.7%, compared with 1.0% for 2018.

Looking ahead, RAM has lowered its inflation forecast for 2020 to 1.7%, from 1.9%. RAM explained that the lowered forecast is due to the government's recent decision to delay the commencement of the targeted fuel subsidy programme, which would have raised consumer fuel prices to market levels effective Jan 1.

"As such, the contribution from the transport component to inflation will likely be lower than initially envisaged, reining in overall inflation.

"Our forecast assumes that the subsidy programme will only begin in 2H 2020 at the earliest, given the registration of eligible M40 recipients will only take place in 2Q 2020," it said.

RAM noted the rising tensions in the Middle East which has created an upward pressure on global crude oil prices, but maintained that it is unlikely to impact Malaysia's inflation in the first half of this year, given the delayed implementation of the targeted fuel subsidy programme.

"Moreover, a prolonged price spike spilling into 2H 2020 is unlikely, given the surplus capacities of OPEC members. As such, we have not built-in this scenario, in our forecast for 2020," it added.