Malaysia CPI & Food Inflation

The latest figures from the statistics department showed that the consumer price index rose 3.2% in December, more than double the 1.2% a year ago, and up from the 2.9% registered in November. This is the highest level since November 2011.

The faster price rises are, partially, a consequence of a series of subsidy cuts introduced by the Government last year, aimed at reducing the country's high debt burden and fiscal deficit. Like a sequence of toppling dominoes, the 10% rise in petrol pump prices and a 15% hike in power tariffs are rippling to prices of other staples such as vegetables and meat.
"This year, 2014 is not going to be as benign as last year," said Nor Zahidi Alias, chief economist at the Malaysian Rating Corporation. "Inflation is going to be a bit hotter, especially in the second half of the year," he added. Hot enough to maybe persuade the central bank to raise its benchmark rate from 3% this year, the first change since mid-2011. Economists are expecting a hike of between 25 and 50 basis points.

A weakening ringgit, down 1.5% since the start of the year and at five-month lows against the dollar, will add to upward pressure on prices through more expensive imports.

Still, most economists expect Malaysia's economy to grow at a robust 5% or more this year, following an expected 4.5-5% growth last year, helped by a brighter global economy that should fuel its vital export sector.
Food and transport prices were among those that rose fastest in December from a year earlier, gaining 4.5% and 5% respectively. 
Two-thirds of Malaysian households earn less than RM5,000 per month. Consumer debt in Malaysia is the among the highest in Asia at around 83% of GDP.

Surging housing prices in major urban centres like Kuala Lumpur, which aren't reflected in inflation figures, have added to middle-class unhappiness over the cost of living. 
Later in the year, the Government is expected to announce a further cut in fuel subsidies, followed at the beginning of 2015 by the introduction of a new consumption tax at 6%.

Source: MalaysianInsider 22-01-2014



Post a Comment