‘Cost of doing business in Malaysia remains fairly contained’
KUCHING: Economists at AmInvestment Bank Bhd’s research arm (AmInvestment) say that the cost of doing business in Malaysia is still fairly contained, supported by a stronger currency foreign exchange (forex) and stable commodity prices.
In a recent report, it said, “We expect the cost of doing business to remain fairly favourable, supported by a stronger US dollar to ringgit and stable commodity prices that should help contain imported inflationary pressures.”
It added, “With the ringgit presenting a firmer outlook against the US dollar, added with stable commodity prices, we expect the Producer Price Index (PPI) to continue rising at a moderate pace. We expect the impact of higher base to slow the gains of PPI reading in the coming months.”
It noted that Malaysia’s PPI continued to grow at single digit for the eighth straight month. It has also been growing at a slower pace for the fourth straight month. In October, the PPI rose 4.7 per cent y-o-y from 6.7 per cent y-o-y in September, bringing the first 10 months’ average to 7.6 per cent y-o-y.
“The slower gain in the PPI was due to a moderate increase in the prices of intermediate material which rose 4.9 per cent y-o-y in October from 6.6 per cent y-o-y in September as well as finished materials which grew by only 0.2 per cent y-o-y in October from one per cent y-o-y in September which could partly be due to the firmer Malaysian ringgit against the US dollar,” it explained.
Meanwhile, it noted that the price of electricity and gas supply rose at a slower pace by 0.2 per cent y-o-y while the cost of water supply fell 0.3 per cent y-o-y in October.
Overall, AmInvestment remarked, “We expect our headline consumer price index (CPI) to average around four per cent while the PPI to hover around 6.8 to seven per cent for 2017.
“While the OPR for 2017 is expected to stay at three per cent in 2017, we maintain our 25bps rate hike in 1H2018 and a probable 25bps rate hike in the second half of 2018 pending the pace of the economic growth, the magnitude of demand-pull inflation as well as the strength of the US dollar to ringgit.”