RAM sees lower full-year inflation of 0.7% amid oil price plunge

PETALING JAYA: Malaysia’s inflation outlook for 2020 has become significantly more dovish amid the plunge in global oil prices, according to RAM Ratings.

“While the inflation rate is envisaged to remain largely unchanged at 1.5% in February, we anticipate it to shift lower through the rest of 2020, coming in at an average of 0.7% for full year as opposed to our earlier projection of 1.7%,” it said in a statement.

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

RAM said lower global crude oil prices will translate into cheaper retail fuel under Malaysia’s current floating fuel price regime (with price ceilings).

“This will in turn ease overall domestic inflation in 2020.”

The rating agency stated that the failure of OPEC+ to reach an agreement over new output cuts and feeble demand due to Covid-19 has resulted in Brent crude oil price nosediving from US$45.3 per barrel (pb) on March 6 to US$27.0 pb on March 20.

Thereafter, unbridled price- and output-setting actions by oil producers will aggravate oversupply and cause substantial inventory build-up.

OPEC’s surplus daily production capacity stands at approximately two million barrels.