Kenanga IB Raises Malaysia's 2026 PPI Growth Forecast To 7.4 Pct Amid Energy Risks

KUALA LUMPUR, Oct 28 (Bernama) -- Kenanga Investment Bank Bhd (Kenanga IB) has raised Malaysia’s 2026 Producer Price Index (PPI) growth forecast to 7.4 per cent from 6.4 per cent previously, amid persistent energy market risks from the prolonged conflict in West Asia.

In a note today, the investment bank said the producer price growth will peak in the fourth quarter (4Q) of 2026 before moderating in 2027, assuming energy markets stabilise and the ringgit remains firm.

It said Brent crude oil prices averaged US$102 per barrel in September, up from US$88.10 per barrel in August, as the West Asia conflict dragged on.

“However, it said risks remain tilted to the upside. A prolonged supply shock would lift transport, manufacturing and food production costs and delay any moderation.

“A strong El Nino, which the US National Oceanic and Atmospheric Administration (NOAA) expects to last through 1Q 2027, threatens farm output and adds upside risk to upstream food prices,” it said, adding that any de-escalation in West Asia would ease energy costs quickly.

Meanwhile, on the domestic impact, Kenanga IB said consumers remained shielded from higher energy prices for now.

It said Malaysia’s Consumer Price Index (CPI) eased to 1.8 per cent in September from 1.9 per cent in August, as unchanged BUDI95 fuel subsidies and broader electricity bill protection covering consumption of up to 800 kilowatt-hours from September to December 2026 absorbed most of the energy shock.

“We expect higher energy, freight and input costs to filter through logistics and food with a lag, lifting the CPI in early 2027.

“We keep our 2026 CPI forecast at 1.9 per cent. We also expect Bank Negara Malaysia to hold the overnight policy rate at 2.75 per cent on Nov 5, 2026, before a 25 basis-point hike to 3.00 per cent in 1Q 2027,” it added.

-- BERNAMA