Inflation forecast to rise to 2% in 2020

THE inflation rate in 2020 is expected to expand 2% compared to the 0.9% growth this year, mainly due to the expected introduction of a targeted fuel subsidy.

The expansion is also expected to be contributed by dissipating base factors and the implementation of a departure levy.

The inflation outlook will be subjected to foreign exchange rate movements and uncertainties in the global oil prices due to trade and geopolitical tensions.

In 2019, the inflationary pressure was curbed due to the fixed fuel prices for RON95 and diesel since March 2019 at RM2.08 and RM2.18 per litre, respectively.

This has resulted in the marginal increase in consumer price index (CPI) by 0.5% between January and August 2019.

The transportation group contracted 3.6% during the period, dragging down the overall CPI growth.

For the whole 2019, inflationary rate is expected to grow 0.9% partly attributed to the imposition of departure levy ranging from RM8 to RM150 commencing in September.

Nonetheless, the introduction of the sugar tax in July this year is expected to have minimal impact on the overall inflation given its relatively smaller weightage in CPI basket. The producer price index (PPI) for local production fell 2% between January and August this year, due to the decline in agriculture, forestry and fishing, mining and manufacturing sectors.

The decline in PPI was due to weaker commodity prices, particularly crude oil and crude palm oil.