INFLATION figures for the year 2024 in Malaysia are expected to be heavily influenced by the implementation of domestic policies such as price controls and targeted fuel subsidies, as well as the fluctuation of the ringgit currency.
According to Bank Negara Malaysia (BNM) governor Datuk Shaik Abdul Rasheed Abdul Ghaffour, the overall impact on inflation will depend on the magnitude and timing of fuel price adjustments along with any additional mitigating measures such as targeted cash transfers.
“Externally, continued pressures from the exchange rate and risks to global commodity prices could fuel additional cost-push inflation.
“Nonetheless, weaker-than-expected global growth conditions could lead to more subdued global commodity prices, which would place downward pressure on domestic inflation,” he said in a press conference in conjunction with BNM’s flagship publications today.
Abdul Rasheed added that headline inflation moderated to 2.5% in 2023 from 3.3% in 2022, attributed to eased cost conditions and stabilised domestic demand.
“This downtrend was also observed across a range of alternative measures of underlying inflation, affirming that the disinflation was broad-based across the consumer price index (CPI) basket.”
Looking ahead to 2024, BNM projects inflation to average between 2.05 and 3.5%. Abdul Rasheed mentioned that this wider forecast range accounts for potential upside impact on inflation from subsidy rationalisation.
Moreover, he expects core inflation to remain moderate in 2024, averaging between 2.0% and 3.0%, reflecting stable demand conditions and contained cost pressures.
Abdul Rasheed also emphasised that monetary policy in 2024 will prioritise maintaining price stability to support sustainable economic growth. Monetary policy decisions will continue to be forward-looking, informed by the Monetary Policy Committee’s assessment of domestic inflation and growth prospects.
“Our baseline forecast is for Malaysia’s growth to improve and inflation to remain moderate. This provides an appropriate environment for implementing key structural policies that are needed to further enhance Malaysia’s growth potential and prospects,” he further added.
“The effects of these policies, including the subsidy rationalisation, will be assessed to discern the short-to-medium term impact on domestic inflation and growth.”
Furthermore, Abdul Rasheed highlighted the MPC’s awareness of potential risks to domestic inflation and growth from global factors. Monetary policy decisions will be guided by the MPC’s assessment of the balance of risks to domestic inflation and economic growth outlook.
“Amid the evolving economic landscape, our monetary policy approach going forward will continue to be data-driven. The MPC remains vigilant to ongoing developments, and their implications to Malaysia’s inflation and growth outlook.” – March 20, 2024
Main photo credit: Borneo Post Online
