CGS-CIMB Securities Sdn Bhd expects the inflation rate to increase to 1.6% in 2021, driven primarily by higher commodity prices.
In a research note today, the brokerage firm said higher food and oil prices have raised Malaysia’s headline Consumer Price Index (CPI) by 0.5% month-on-month (mom) in December 2020, translating into a milder deflation of 1.4% year-on-year (yoy).
Excluding fresh food and administered items, core inflation stayed at 0.7% yoy and was flat mom in December 2020.
For the full year, the CPI contracted 1.2% yoy, the first annual deflation since 1969.
“Non-durable goods recorded a smaller deflation last month amid costlier prices of meat, milk, vegetables and cooking oil, among other food items, due to poor weather conditions.
The continued recovery in crude oil prices narrowed the decline in the fuel and lubricating index.
“This is a trend which we expect to continue in 2021, (thus) leading to a rebound in annual headline inflation to +1.6% yoy,” it said.
CGS-CIMB expects inflation for durable goods to be milder at 2.3% yoy against 2.4% yoy in November 2020, and the inflation rate for semi-durable goods and services to remain steady.
On risks to Malaysia’s economic outlook, it estimated a 0.7% points reduction in the gross domestic product growth for every fortnight the movement control order (MCO) 2.0 is in effect.
In addition, it believes that there is a good chance of further monetary policy easing by Bank Negara Malaysia.
“We project a 25 basis points reduction in the overnight policy rate to 1.50 per cent in the first half of this year,” it added. – Jan 22, 2021
