KUALA LUMPUR: Public Investment Bank Bhd expects Malaysia to face high inflationary pressures in the short term although the rate is expected to slow down in the first half of 2023 (H1’23).
In a note today, Public Investment Bank said that contributing to this outlook are several upward risks, including elevated global commodity prices brought on by geopolitical tensions, adverse weather patterns, stronger-than-anticipated Chinese demand, and elevated input costs resulting from exchange rate developments.
“In addition, modifications to domestic subsidy and price control policies may pose additional inflationary pressures.
“Nevertheless, we believe that the subsidy ceiling for RON 95 and diesel, set at RM2.05 and RM2.15 per litre, respectively, may be subject to review and potentially increase gradually in the latter part of the year,” it said.
Public Investment Bank said that without petrol subsidies, it is estimated that the actual price of RON95 has reached RM3.22 per litre compared with the present RM2.05 per litre.
“Hence, we anticipate that gradual adjustments to subsidised prices of RON95 and diesel in H2’23 could result in the country’s headline inflation approaching the upper limit of the official projection range of 2.8% to 3.8%.
“Additionally, we estimate that eliminating fuel subsidies for the T20 income group (which accounted for 35% of all fuel subsidies in 2022) would increase inflation by an additional 0.45-0.75 percentage points annually,” Public Investment Bank said.
Source: https://www.thesundaily.my/business/malaysia-expected-to-face-inflationary-pressures-in-short-term-AI10903223