Domestic inflationary pressure to ease by year-end

By BERNAMA / Graphic By TMR

Inflationary pressure is likely to trend downward in the remaining months of 2018, mainly driven by the price of fuel, which will no longer be floated on a weekly basis and pegged to the present price.

Sunway University Business School economics Prof Dr Yeah Kim Leng said the measure, which was introduced in May 2018 by the new government, would cushion any inflationary pressure.

“It will provide a dampening effect on inflationary pressure until the government decides to change (the policy),” he told Bernama in response to the higher Consumer Price Index (CPI) recorded for May.

The CPI rose 1.8% year-on-year in May to 121.1 from 119 previously, prompted by costlier fuel and food and non-alcoholic beverages.

The index for the transport group rose 3.8% in May 2018, while food and nonalcoholic beverages, which accounted for 29.5% of the CPI, rose 2.2%.

The CPI measures changes in the price level of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies, and the annual percentage change is used as a measure of inflation.

Between January and May, the CPI registered an increase of 1.7% against the same period last year.

The Finance Ministry announced earlier this month that the government had allocated RM3 billion to subsidise pump prices until year-end where the RON95 fuel and diesel are fixed at RM2.20 and RM2.18 per litre respectively, while RON97 is floated on a weekly basis.

Yeah said May’s higher CPI was broadly within market expectation and was still manageable as it was still below the 2% mark.

Echoing Yeah’s sentiment, Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said stable oil prices and the removal of the Goods and Services Tax (GST) would see CPI easing off by year-end.

“The climb is at a moderate pace. Going forward with the zero-rated GST, we expect the CPI to drop in June and perhaps maintain a moderate rate for the rest of the year,” he added.