HEADLINE INFLATION BETWEEN 2.7 PCT AND 3.2PCT IN 2023 - AMBANK RESEARCH

KUALA LUMPUR, Sept 22 (Bernama) -- AmBank Research expects headline inflation this year will be in the 2.7 per cent and 3.2 per cent range, while core inflation will be around 3.0 per cent.

In a research note today, AmBank Research said that any downward surprise to private consumption may lead to lower core inflation from our baseline forecast.

It also expects the overnight policy rate (OPR) to stay at 3.00 per cent in 2023, given the persistent decline in inflation and the need to support domestic demand in view of declining external trades. 

In August 2023, the Consumer Price Index (CPI) grew 2.0 per cent year-on-year, bringing the year-to-date inflation to 2.9 per cent. 

Core inflation, which excludes volatile items and controlled prices, eased to 2.5 per cent year-on-year in August 2023 against 2.8 per cent year-on-year in July 2023, while on a year-to-date basis, core inflation stood at 3.4 per cent. 

AmBank Research said that within the CPI basket, most of the major items are experiencing a disinflationary trend throughout the year, including food items, as well as restaurants and hotels.

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“The exception, however, is education inflation due to higher pre-primary and primary education.

“Domestic drivers for inflation in 2024 to come from policy direction concerning subsidy rationalisation and progressive wage model, and we expect more information on these factors to surface during the tabling of Budget 2024 later in October,” it said. 

AmBank Research opined that if global oil prices remained elevated, it would likely influence the direction of inflation further.

“Our preliminary estimate for inflation in 2024 currently stands at 2.5 per cent, and any revision to this estimate is a function of new information flow regarding the two key factors, namely subsidy rationalisation and progressive wage model, as well as global oil prices,” it said.

AmBank Research said it currently does not expect any significant changes in petrol prices as the subsidy rationalisation is likely to be implemented sometime next year.  

On movement on rice price, it reiterated that the latest export ban from India will push rice prices higher since India is the world’s second-largest producer.

“We noticed that global rice prices have been trending higher since the beginning of the second half of 2023. Between June 2023 and August 2023, global rice prices increased by 28.5 per cent on average,” it said.

Challenging environment for global agriculture

Meanwhile, MIDF Research maintained its CPI forecast at 3.0 per cent for 2023 and food inflation to remain at the range of 5.5 per cent to 6.0 per cent in the second half of the year due to an externally challenging environment, especially for global agriculture output.

For the first eight months of the year, average food inflation registered at 5.7 per cent year-on-year, equivalent to the previous year’s 5.7 per cent. 

MIDF Research said the prolonged depreciated ringgit, among others, will lead to higher imported inflation, particularly via food prices, as Malaysia is a net importer of most food products. 

“As for non-food inflation, we are confident the government will keep retail fuel prices status quo at least until the end of this year. Non-food inflation is expected to average at 1.5 per cent.

“Considering both CPI components, we foresee Malaysia’s headline inflation rate to average at 3.0 per cent for 2023,” it said.

-- BERNAMA