Cost Absorption Keeps Inflation Low But Price Pressures May Build In 2027 — Bank Muamalat

KUALA LUMPUR, Oct 8 (Bernama) – The gap between Malaysia’s producer and consumer inflation suggests businesses are absorbing some of their rising costs, although consumers could face higher prices if these pressures persist, according to Bank Muamalat Malaysia Bhd.

Its chief economist Dr Mohd Afzanizam Abdul Rashid said the bank expected inflation to rise to 2.2 per cent in 2027 from its projected 1.8 per cent for 2026 as businesses potentially pass on higher operating costs to consumers.

He said consumer price index inflation of around 1.9 per cent indicated that businesses had yet to fully pass on higher raw material and fuel costs to their customers.

“Businesses are willing to absorb some of the rising raw material costs, rising fuel costs and whatnot, because they want to protect their market share and they want to maintain their relationship with their clients,” he told reporters on the sidelines of Bank Muamalat Malaysia Bhd’s Corporate Economic Forum 2026 here today.

The forum carried the theme “Malaysia 2027 and Beyond: Reading the Economy, Reading the Nation”.

However, he said, businesses could only continue absorbing these additional costs for a limited period before passing them on to consumers.

He said there was a lag between rising operating costs and their impact on consumer prices, with businesses likely to pass on the increases if raw material and other costs remained elevated.

“The trajectory for inflation next year could be higher than this year,” he said.

His comments came after World Bank lead economist Apurva Sanghi cautioned that rising upstream cost pressures could pose an inflation risk later this year, despite Malaysia recording inflation among the lowest in the region.

Speaking at a briefing on the October 2026 East Asia and Pacific Economic Update, Apurva said producer price inflation had swung from negative territory in December 2023 and February 2024 to over 10 per cent in June and almost 11 per cent in August this year.

Nevertheless, the World Bank projected headline inflation to rise modestly to two per cent in 2026, with subsidies limiting the pass-through of higher energy prices to households.

– BERNAMA