Saturday, 04 Apr 2020
26/03/2020 12:01 PM

KUALA LUMPUR, March 26 -- The Malaysian Consumer Price Index (CPI) results, which rose 1.3 per cent year-on-year (y-o-y) to 122.4 points from 120.8 points in February 2019 as announced by the Department of Statistics Malaysia (DOSM), have led research firms to revise downward their CPI forecasts amid the COVID-19 outbreak.

Kenanga Research said in a note that the Movement Control Order (MCO), which has been extended to April 14, will adversely impact private spending, with both firms and households expected to adopt cautious spending behaviour, weighing on prices of discretionary goods amid rising uncertainty on the level of future incomes. 

“With lockdowns implemented across the globe along with the ongoing oil price war between Saudi Arabia and Russia, crude oil prices are also expected to remain pressured, bringing down domestic retail fuel prices,” it said.

Kenanga Research’s 2020 CPI forecasts were revised downwards to 0.5-1.0 per cent from 1.0-1.5 per cent as compared with 0.7 per cent in 2019, incorporating spillovers from the COVID-19 outbreak.

“The next Monetary Policy Committee (MPC) decision will depend on the development of the rapidly evolving COVID-19 pandemic.

“Should the situation worsen even after the MCO and coupled with a potential global crisis, it would not surprise us if Bank Negara Malaysia (BNM) brings the Overnight Policy Rate (OPR) all the way down to match the Global Financial Crisis-low of 2.00 per cent,” it said.

Meanwhile in a separate note, Public Investment Bank Bhd opined that the CPI announcement indicates supportive fiscal and monetary measures which are expected to be positive for CPI in 2020 although the research firm has turned cautious in its outlook for the year. 

The sharp downturn in oil prices, which are at a 16-year low now, and the still evolving nature of the COVID-19 pandemic may push economic activity to slow down markedly, it said.

“However, this is expected to recover and regularise in a measured pace in the second half of April before hitting its full potential in the second half of the year,” it said.

Public Investment Bank said this may take a toll on inflation in line with its lower full year projection for the year of 0.8 per cent compared with 0.7 per cent for 2019.

Affin Hwang Capital on the other hand said in view of the lower cost of transport, reflecting lower domestic retail petrol prices, and a slowing economy, the research firm is revising downward its headline inflation to average around 1.2-1.4 per cent for 2020 from its earlier estimate of 1.8-2.0 per cent, compared with 0.7 per cent in 2019. 

In terms of monetary policy, Affin Hwang Capital said with inflationary pressure remaining under control, it believes BNM may lower its OPR further by another 25 basis points at its May MPC meeting to 2.25 per cent, due to the negative impact of the COVID-19 outbreak and the potential downside of low global oil prices on the domestic economy.

To recap, the Malaysian CPI rose 1.3 per cent y-o-y to 122.4 points, from 120.8 points in February 2019. 

In a statement today, Chief Statistician Malaysia Datuk Sri Dr Mohd Uzir Mahidin said of the 552 items covered under the index, 343 items showed an increase last month against February 2019. 

The increase in the overall index was driven by a 2.5 per cent increase in the Miscellaneous Goods & Services Index, a 2.4 per cent increase in the transport index, a 1.5 per cent increase in the Housing, Water, Electricity, Gas and other fuels index and a 1.5 per cent increase in the communication index. 





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