KUALA LUMPUR: Inflation in Malaysia is expected to remain stable in the coming months with only a minimal impact from subsidies rationalisation, according to an economists.
The country's headline inflation, as measured by the change in the Consumer Price Index (CPI), is currently a little below historical averages, the economists said.
Malaysia University of Science and Technology economist Dr Geoffrey Williams said there may be some impact from subsidies rationalisation, but it will not be significant because inflation is currently below the average.
"Core inflation is elevated but slowing gradually. This means that we have a stable environment and no expectations of higher interest rates," he told Business Times.
According to Williams, the current trend in CPI aligns precisely with expectations and the forecast made 12 months ago.
He noted that the rise in prices is slowing across most categories and continues to fall for communications services.
"The rise in prices for food and restaurants is also slowing, except for meat.
"The main drivers are lower oil prices, better competitive conditions as supply opens up and stronger consumer awareness which is holding back retailers from passing on costs too much," he added.
On how inflationary pressures will affect CPI this year, Williams said there is expected to be a very minimal impact.
Low and stable inflation for 2024 is imminent unless there is a major shock to supply chains or the global economy, he added.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid opined that the upside risk to inflation is visible.
"We have policy changes that will happen this year, such as the rise in Services tax, the introduction of Low-Value Goods Tax, and the rationalisation of subsidies, among others.
"My sense is that there is a chance that inflation would linger around three per cent this year," he noted."
Malaysia's inflation held steady at 1.5 per cent in December, meeting market expectations.
The annual headline inflation for the year was reported at 2.5 per cent, down from 3.3 per cent in 2022, according to the Department of Statistics Malaysia.
The department's December CPI revealed that the key contributors to the inflation increase were lower upticks in restaurants and hotels (3.7 per cent), miscellaneous goods and services (2.7 per cent), and food and non-alcoholic beverages (2.3 per cent).
Notably, health (2.5 per cent) and transport (0.3 per cent) also experienced price hikes.
Core inflation, which excludes volatile items, rose at a slower pace of 1.9 per cent in December compared to two per cent in November.
Despite the slowdown, core inflation remained higher than the overall national inflation rate.
Comparing Malaysia's inflation to other countries, the National Statistics Department reported that Malaysia's December 2023 inflation was lower than that of the Philippines (3.9 per cent), Vietnam (3.6 per cent), the United States (3.4 per cent), South Korea (3.2 per cent), Eurozone (2.9 per cent) and Indonesia (2.6 per cent).
However, it surpassed the CPI in Thailand, which recorded a 0.8 per cent contraction, and China where prices dropped by 0.3 per cent.