Image Credits: Free Malaysia Today
Malaysia’s headline inflation showed a marginal decline in August, with the consumer price index (CPI) growth easing to 1.9% year-on-year (y-o-y), down from 2% y-o-y observed from May to July. This latest figure falls below the 2% increase forecasted in a Reuters survey of economists, indicating a moderate inflationary environment.
According to MIDF Research, the subdued CPI rise suggests that recent policy changes, including subsidy re-targeting, tariff hikes, and increases in service tax rates, have not triggered significant price surges. However, the research firm anticipates that these policy adjustments will eventually contribute to a gradual increase in inflation, particularly in the non-food sector.
Looking ahead to the fourth quarter of 2024 (4Q24), MIDF predicts further subsidy rationalization, including targeted RON95 petrol subsidies, which may exert additional inflationary pressure. Should the government opt for a gradual adjustment in petrol prices based on a managed float mechanism, the overall inflation could see incremental increases.
MIDF Research has maintained its 2024 headline CPI growth projection at 2.3%, supported by the moderate inflation rate of 1.8% recorded for the first eight months of the year. In comparison, last year’s CPI increase was recorded at 2.5%.
August’s inflation was primarily driven by rises in several key sectors. Restaurant and accommodation services saw an increase of 3.2%, while personal care and miscellaneous goods also rose by 3.2%. Other contributing factors included housing and utility costs, which grew by 3.1%, and recreation, sports, and culture, which increased by 2%. Notably, the clothing and footwear category experienced a slight decline, remaining at -0.2%.
Chief Statistician Datuk Seri Mohd Uzir Mahidin noted that inflation for restaurant and accommodation services had eased from 3.4% in July to 3.2% in August, reflecting slower increases in beverage preparation services. The food and beverage group, accounting for 29.8% of the CPI weight, maintained a steady increase of 1.6% in August, consistent with the previous month.
In the transport sector, inflation rose to 1.3% in August, up from 1.2% in July, largely due to rising costs in personal transport operations. The average price of diesel in Peninsular Malaysia reached RM3.27 per litre, significantly higher than RM2.15 per litre a year ago.
When compared internationally, Malaysia’s August inflation rate of 1.9% remains lower than that of Indonesia (2.1%), Vietnam (3.5%), and the Philippines (3.3%), but higher than rates in China (0.6%) and Thailand (0.4%). Overall, the latest CPI figures suggest a carefully managed inflation landscape as Malaysia navigates its economic policies.