KUALA LUMPUR, Jan 20 — MIDF Research foresees a slower inflation rate for 2023 across all states underpinned by lower food inflation, stable fuel prices and appreciation of the ringgit against the US dollar.
The research house also forecasts headline inflation to average 2.3 per cent this year as long as the government maintains the current fuel subsidy. It is likely to do so, ‘at least’ for 2023, it said.
“We foresee fuel inflation to stay on a deceleration path and alleviate overall inflationary pressure,” it said in a research note today.
The Department of Statistics said today that Malaysia’s rate of inflation eased to 3.8 per cent year-on-year in December 2022 with price increases slowing over the month in several sectors, including food and transport.
Inflation for 2022 was up 3.3 per cent versus 2.5 per cent in 2021, it said.
MIDF Research expects Malaysia’s domestic food inflation to decelerate further following lower global commodity prices, particularly among agriculture-related produce and improving supply chain regionally and domestically.
“With the focus on resolving cost of living issues, we believe food inflation will ease slightly starting the first quarter of 2023,” it added.
The house said the ringgit is appreciating against the US dollar, with the US Federal Reserve signalling a slower rate hike pace in December 2022. This will reduce imported inflation pressures as Malaysia is a net-food importer of most food products.
Meanwhile, AmBank expects headline inflation to be modest at 3.0 per cent in 2023. The ringgit has appreciated by 9.7 per cent against the US dollar since a low of 4.75 in November 2022.
Lower commodity prices also helped to contain headline inflation while core inflation is expected to decline in tandem with a slower rate of private consumption expected over the same period. Core inflation excludes volatile sectors like food, fuel, and transportation.
“But the risks on core inflation tilts to the upside given that private consumption remains strong, judging from the higher distributive trade sales in the second half of 2022,” said AmBank.
Its view would change should the targeted fuel subsidy be implemented, if flooding and other climate-related disasters were to erupt, and unexpected weakening of the ringgit.
A 1.0 cent rise in RON95 could push the consumer price index by 0.04 per cent, AmBank said.