Published on 23 Feb 2021.
RAM Ratings estimates Malaysia’s inflation to rebound to 0.2% in January (December 2020: -1.4%), ending a ten-month streak of deflation. The acceleration mainly stems from a shallower deflation in the transport component amid higher fuel prices. Following global oil price recovery, the retail price of RON95 fuel climbed to an average of RM1.87/litre in January 2021 from RM1.74/litre in the preceding month. Further, the expiration of electricity discounts under the Prihatin stimulus package – which were a mainstay from April through December 2020 – will ease some deflationary pressure.
The government’s recent decision to lower the ceiling price of RON95 and diesel to RM2.05/litre and RM2.15/litre, respectively, will help limit potential inflationary pressure should the current upward trajectory in global oil prices persist. With the cost of Brent crude currently hovering around USD60 per barrel, our estimates indicate that price caps will kick in if it rises above USD65 per barrel.
Given higher global oil prices compared to last year’s and subsiding electricity deflationary pressure, we expect Malaysia’s headline inflation to average higher at 2.3% from -1.2% in 2020.
Sources: RAM, Department of Statistics Malaysia (DoSM), and US Energy Information Administration
Summary of RAM’s key projections
Sources: RAM, DoSM, Ministry of Finance and Bank Negara Malaysia
* Assumes no further extension of MCO 2.0 (to end on 4 Mar)
Note: 2021f figures are RAM’s projections.
Nur Nadia binti Mazlan
(603) 3385 2513
(603) 3385 2577
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 2021 by RAM Rating Services Berhad