KUALA LUMPUR, Aug 25 — MIDF Research has maintained Malaysia’s Consumer Price Index (CPI) forecast at 3.0 per cent for 2023, despite the latest July data indicating it has cooled to 2.0 per cent.
In a note today, the research house said the average food inflation was 6.0 per cent year-on-year (yoy) for the January-July 2023 period, much higher than the 5.7 per cent registered for the same period a year ago.
“We estimate food inflation to remain at a range between 5.5 per cent and 6.0 per cent in the second half of 2023 (2H 2023) due to an externally challenging environment, especially for global agriculture output.
“Also, a prolonged depreciated ringgit will also lead to higher imported inflation — particularly via food prices — as Malaysia is a net importer of most food products,” it said.
Non-food inflation is expected to average at 1.5 per cent. The research firm is confident that the government will keep retail fuel prices status quo, at least until year-end.
“Considering both CPI components, we foresee Malaysia’s headline inflation rate to average at 3.0 per cent for 2023,” it said.
Separately, AmBank Economic Research said at this point, it does not expect any significant changes in petrol prices with RON95 to stay at RM2.05 and diesel at RM2.15 per litre for the rest of the year.
Headline CPI has been rising by 0.1 to 0.2 per cent month-on-month this year, which is modest versus last year’s 0.1 and 0.6 per cent increase, the research house said.
“Headline inflation will range between 2.7 per cent and 3.2 per cent this year. We expect core inflation to be around 3.0 per cent,” it said.
The research house also said lingering uncertainties about inflation and overnight policy rate (OPR) are expected to persist into 2024.
“The balance of risk is tilted to the upside on the inflation front. Market participants will closely observe communication regarding subsidy rationalisation and the implementation of progressive wage model,” it said.
Malaysia’s economy grew by 4.3 per cent in the first half of 2023 (1H 2023) mainly due to exports contracting and if growth in the 2H 2023 is below 3.7 per cent, it implies a full-year GDP growth of less than 4.0 per cent, the house said.
“In this context, we opine that monetary policy will stay accommodative to support domestic demand in view of external uncertainties. Bank Negara’s Monetary Policy Committee is expected to meet on Sept 6-7 and Nov 1-2, 2023. We expect the OPR to remain at 3.0 per cent throughout these meetings,” it said.
— Bernama
