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December 2019 inflation expected to reach 1.2%

Published on 21 Jan 2020.

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RAM Ratings expects Malaysia’s overall inflation rate for December 2019 to accelerate to 1.2%, from 0.9% the preceding month. This is primarily due to a larger contribution from the food component amid low-base effects from the previous year. For the full year, we expect overall inflation to clock in at 0.7% in 2019 (2018: 1.0%).

Looking ahead, RAM has lowered its inflation forecast for 2020 to 1.7%, from 1.9%. This follows the Government’s recent decision to delay the commencement of the targeted fuel subsidy programme, which would have raised consumer fuel prices to market levels effective 1 January. As such, the contribution from the transport component to inflation will likely be lower than initially envisaged, reining in overall inflation. Our forecast assumes that the subsidy programme will only begin in 2H 2020 at the earliest, given that the registration of eligible M40 recipients will only take place in 2Q 2020.

Rising tensions in the Middle East have exacerbated fears of severe supply disruptions, in turn exerting upward pressure on global crude oil prices. That said, this is unlikely to impact Malaysia’s inflation in 1H 2020 given the delayed implementation of the targeted fuel subsidy programme. Moreover, a prolonged price spike spilling into 2H 2020 is unlikely given the surplus capacities of OPEC members. As such, we have not built in this scenario in our forecast for 2020. 


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

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

 

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Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad



Publication Date Published Category
Economic Insight: December 2019 CPI 21-Jan-2020 Economic Insight View PDF

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