‘Stable inflationary pressure across M’sia’
Stable inflationary pressure has been recorded across the country during the first month of the year, with Sarawak inflation rate moderated to 1.9 per cent y-o-y in January 2024, the lowest since May 2022, analysts observed.
In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) stated: “Sarawak's overall inflation rate moderated to 1.9 per cent y-o-y in January 2024, the lowest since May 2022.
“Peninsular Malaysia and Sabah recorded lower at 1.5 per cent y-o-y. Key CPI components were moderating across the country.”
However, it pointed out that it foresee steady uptick in inflation of housing & utilities amid readjustment of utilities tariffs announced early this year.
“Moving forward, we foresee inflation across all regions and states to rise gradually in line with the expectation of higher inflation at the national level,” it opined.
It noted that Malaysia's headline inflation rate came in at 1.5 per cent y-o-y the first month of 2024. The rate plateaued since November 2023, the lowest since March 2021.
“Looking into the first half of 2024 (1H24), we should expect gradual pick-up in overall prices following increase in utility charges, implementation of higher SST rate to eight per cent (except for food & beverage and telecommunications) and 10 per cent for low value goods tax (LVGT).
“In the later half, we opine that it is possible that the roll-out of fuel targeted-subsidy may see higher retail fuel price,” it said.
Overall, MIDF Research overall inflation rate might register at 3.2 per cent on the assumption that the fuel-targeted subsidy would possibly be rolled-out as early as June 2024.
“We opine the government may introduce a managed-float price mechanism for RON95 and provide cash assistance to those eligible as guided by the PADU database.
“Thus, we may see non-food inflation to come in at 2.5 per cent while better domestic supply and normalised global commodity prices shall push food inflation rate lower at 4.5 per cent in 2024,” it said.
On the external front, the research team at RHB Bank Bhd (RHB) said it remained cautious about the potential upside bias for commodity and food prices in the upcoming months.
“The commodity prices would be buoyed by the higher demand amid the acceleration in global activities coupled with the risks of supply congestion.
“The materialisation of China's economic recovery in 2024 (where there have been more signs of stronger economic momentum as per the latest data releases) could lift the commodity demand and prices i.e. crude oil prices and base metals.
“In addition, our proprietary El Nino-Food model suggests that the NOAA Oceanic Nino index leads global food prices by between 12 to 18 months. This imply that there would be potential spillover effect to Malaysia's food inflation for 1H24,” it opined.
All in, it maintained its 2024 headline inflation projection at 3.3 per cent y-o-y taking into consideration the potential upside from the policy manoeuvres amid the fiscal consolidation plan.
“According to our estimates, the proposed policy measures is projected to lift the headline inflation by 0.7 to 1.1 per cent (versus 2.5 per cent y-o-y in 2023).
“Policies such as fuel subsidy rationalisation and the revision in services tax would likely to have material impact on the inflationary trajectory.
“Following the anticipated rollout of services tax revision and diesel subsidy rationalisation in later of the year, we expect the inflation momentum to rebound as early as 2Q24,” it said.
Sarawak’s overall inflation rate moderated to 1.9 per cent y-o-y in January 2024, the lowest since May 2022.
MIDF Research