• PRESS RELEASES

RAM Ratings expects return of inflation in March amid ebbing deflationary pressure from transport fuel component

Published on 23 Apr 2019.

Share Tweet Email

RAM Ratings expects consumer prices to rise 0.2% in March, marking a return to an inflationary trend after two consecutive months of deflation. The acceleration is underpinned by more moderate deflationary pressure from the transport component. The average price of RON95 petrol declined at a slower pace of 5.4% in March, from the preceding month’s 12.1% contraction. Given the government-imposed price ceiling of RM2.08/litre, however, deflationary pressure from the transport fuel component is expected to linger until the implementation of the targeted fuel subsidy scheme.

Looking ahead, overall inflation is projected to accelerate to 1.6% in 2019, from last year’s 1.0%. That said, inflationary pressure is not envisaged to be evenly spread out through the year. The greater inflationary pressure this year is only envisioned to kick in during the second half due to the additional pressure from the switch to targeted fuel subsidies and the low-base effect during the zero-GST period in 2H 2018. This will have a compounding effect on the upward pressure from the spillover effects vis-à-vis the reintroduction of the Sales and Service Tax in September 2018.

RAM is maintaining its base-case scenario of an unchanged OPR of 3.25% in 2019, given the need to balance between capital outflow pressures and growth support. “While mounting growth concerns have made a stronger case for a rate cut, the risk of capital outflows has also heightened amid intentions of either excluding or lowering the weight of Malaysian bonds in global bond benchmark indices. The key trigger of looser domestic monetary policy remains the risks to domestic growth arising from a significant global downturn,” notes Kristina Fong, RAM’s head of research. So far, domestic demand has stayed healthy, with some upside potential following the Government’s decision to resume the East Coast Rail Link project and a boost from increased foreign direct investment interest. RAM will closely monitor economic developments and revise our OPR projection if necessary.

 

Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512
khaijhek@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2019 by RAM Rating Services Berhad



Publication Date Published Category
Economic Insight: March 2019 CPI 23-Apr-2019 Economic Insight View PDF

Loading...