by ALIFAH ZAINUDDIN/ graphic by MZUKRI
MALAYSIA’S overall inflation rate for December 2019 has been projected to accelerate to 1.2% from 0.9% the preceding month due to a larger contribution from the food component amid low-base effects from the previous year.
RAM Rating Services Bhd (RAM Ratings), however, stated in its full-year inflation forecast for 2019 that the rate is still lower year-on-year (YoY) at 0.7% against 1% recorded in 2018.
The rating agency also estimated that inflation will hover at 1.7% in 2020 — revising it down from 1.9% previously, following the government’s decision to delay the commencement of the targeted fuel subsidy programme, which would have raised consumer fuel prices to market levels on 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 the second half of 2020 (1H20) at the earliest, given that the registration of eligible middle 40% income group recipients will only take place in the second quarter this year,” RAM Ratings said in a statement yesterday.
The delay of the targeted fuel subsidy programme will also allay any upward pressure from global crude oil prices susceptible to ongoing tensions in the Middle East.
As such, the prospect of severe supply disruptions will unlikely impact Malaysia’s inflation in 1H20, it said.
“In addition, a prolonged price spike spilling into 2H20 is unlikely given the surplus capacities of OPEC members. As such, we have not built in this scenario in our forecast for 2020.”
Malaysia’s Consumer Price Index (CPI) — a measure of the country’s inflationary level — rose 0.9% to 122.1 points in November from 121 points last year, mainly driven by the increase in goods and services index.
Department of Statistics Malaysia chief statistician Datuk Seri Dr Mohd Uzir Mahidin said year-to-date, the index posts a 0.7% increase against the same period a year earlier, driven by the spikes across goods and services, housing, water, electricity, gas and other fuels, as well as education.
Three states, namely Kuala Lumpur, Selangor and Penang recorded higher inflation rates, surpassing the national CPI rate of 0.9% in November 2019.
The November CPI reading was below the forecast of economists surveyed by Reuters, who had predicted a higher increase of 1.2% due to a drop in prices for clothing and footwear, as well as lower transport costs.
The index first fell below 1% in June 2018, the first in 40 months on the zero-rated Goods and Services Tax, and discounted prices of good. The index later fell into deflation for the first two months of 2019 before it posted a stagnant growth of 0.2% YoY consecutively in March, April and May.
Bank Negara Malaysia said in November last year it expects the country’s headline inflation to be “low” in 2019 and remain modest with a slight increase in 2020.