2.3-2.5 pct inflation expected in 2023 if fuel-subsidy mechanism maintained -- MIDF Research

25/11/2022 05:51 PM

KUALA LUMPUR, Nov 25 (Bernama) -- MIDF Amanah Investment Bank Bhd Research (MIDF Research) expects Malaysia’s inflation to hover between 2.3 and 2.5 per cent in 2023 as the newly-formed unity government is very likely to keep the current fuel-subsidy mechanism status quo.

In a note today, MIDF Research said as guided by Pakatan Harapan (PH) manifesto blueprint, the PH-led government may review the monopoly practices on several agriculture-related items with the idea to increase output supply and lower food prices. 

“Thanks to the 15th General Election (GE15), Malaysia’s inflation outlook is much clearer for next year. If status quo on the fuel subsidy (is maintained), hence headline inflation is predicted to hover between 2.3 and 2.5 per cent for 2023," it said.

Meanwhile, the research house said Bank Negara Malaysia (BNM) is very likely to raise the overnight policy rate (OPR) by another 25 basis points (bps) in its first Monetary Policy Committee (MPC) meeting in January next year after Malaysia saw its consumer price index (CPI) grew four per cent year-on-year (y-o-y) in October 2022.

It said although Malaysia's headline inflation continued on a moderating trend in October 2022 compared with the 4.5 per cent y-o-y growth in September 2022, it was still slightly higher than the market consensus of 3.9 per cent.

MIDF Research also upgraded its headline CPI forecast by 0.2 per cent to three per cent for 2022 with domestic demand firming, and expected food price growth to record 5.5 per cent this year, attributed by further depreciation of US dollar-ringgit pair.

Moving into 2023, it said supply-push factors on inflation are expected to soften, underpinned by an appreciation of the US dollar-ringgit pair, moderation in food prices, further easing in global supply chain pressure and normalising commodity prices. 




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