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RAM sees August inflation rising 1.5%

24 Sep 2019 / 12:14 H.

PETALING JAYA: Malaysia’s inflation rate is expected to increase slightly to 1.5% in August from 1.4% in July, according to RAM Ratings.

The marginally higher reading is underpinned by slightly greater inflationary pressure from the food component.

The Department of Statistics is scheduled to release the latest inflation date tomorrow.

For the whole of 2019, inflation is projected to come in at 1%.

The rating agency said while overall price growth was anaemic in 1H 2019 (0.2%), inflation is expected to stay elevated in the second half, driven by the low-base effect from the withdrawal of the GST last year and the eventual rollout of the targeted fuel price subsidy mechanism, which will raise retail fuel prices to market levels.

However, it opined that the spike in global oil prices - following the significant dent in Saudi Arabia’s running oil production capacity - is not envisaged to pose a significant inflationary threat to Malaysia’s overall inflation in the very short term, given the existing fuel price ceilings.

“That said, some inflationary pressure will be felt from this if the targeted fuel price subsidy mechanism debuts this year. However, the extent of the impact will be moderated by the level of efficiency in managing the Saudi supply gap,” noted RAM head of research Kristina Fong.

Meanwhile, the rating agency said it remains unclear if there will be a prolonged supply disruption, which may lift oil prices for an extended period.

“We envisage some impact on the trajectory of inflation if prices are still elevated when the targeted fuel price subsidy mechanism is introduced.”

“In the event of a longer-than-anticipated supply gap and an October debut for the targeted fuel subsidies, full-year inflation could be up to 0.4 percentage points higher than our baseline estimate for 2019.”

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