UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the latest inflation figures in the Malaysian economy.
Key Takeaways
“Headline inflation reversed course and edged up to 2.2% y/y in Sep after easing for four straight consecutive months to a 5-month low of 2.0% y/y in Aug. The reading also came in a tad higher than our estimate and Bloomberg consensus of 2.1%. It was primarily due to higher food prices, costlier household maintenance & repair of dwelling, as well as year-ago low base effects in electricity and transport components.”
“We expect inflationary pressures to remain manageable in 4Q21 as cushioned by government relief measures. This will bring full-year inflation to an average of 2.5% for 2021 (BNM’s forecast: 2.0%-3.0%). That said, heading into 2022, upside risks to the inflation outlook have emerged following a global energy crunch, prolonged global supply chain bottlenecks, and labour shortage post-pandemic, which could lead to more persistent inflation and second-round effects. While utility discounts, fuel and cooking oil subsidies are expected to be extended into 2022, regulators are due to firm up the next base electricity tariff adjustment for the period beginning Jan 2022 to Dec 2024 amid surging fuel costs. Hence, we reiterate our inflation outlook for 2022 at 2.5%.”