Monday, July 22, 2024

Forecasted Rise in Malaysia’s 2024 Inflation: A Detailed Analysis from the Economists’ Perspective


Economists Forecast 2024 Headline Inflation to Rise Between 2.5% and 3.3%

In the realm of economic forecast and analysis, significant attention is turned towards Malaysia’s inflation prospects for the year 2024. Recent predictions from leading research institutions have outlined an expected range for the country’s headline inflation, with figures spanning from as low as 2.5% to as high as 3.3%.

At the more conservative end of the spectrum, OCBC Global Market Research anticipates a 2.5% inflation rate. This forecast, as highlighted by senior Asean economist Lavanya Venkateswaran, suggests an anticipated rise in price pressures over the coming months. Central to this outlook is the manner and timing of fuel subsidy rationalisation which is expected to play a pivotal role in shaping the inflation narrative. Despite potential upticks, the inflation rate is projected to stay within manageable bounds, supporting expectations that the Bank Negara Malaysia (BNM) will maintain the overnight policy rate (OPR) at a steady 3% in 2024.

The commencement of this year saw Malaysia’s headline inflation steadfast at 1.5% in January, with comparisons drawn against the previous year’s consumer price index figures. This measured rate, although slightly below the anticipated benchmark set by OCBC and RHB Investment Bank, denotes minimal fluctuation from previous estimates.

Conversely, RHB Investment Bank holds a more robust inflation forecast of 3.3% for 2024. This outlook takes into account the potential inflationary implications stemming from fiscal policy adjustments aimed at economic consolidation. Significant attention is paid to the structural impacts of fuel subsidy rationalisation and amendments in service taxes, poised to influence the trajectory of inflation notably. Factors such as the timing and magnitude of these fiscal adjustments, alongside the ripple effects on household expenditure and business operational costs, are expected to dictate the scale of inflationary pressures.

RHB Investment Bank also presents a cautious stance towards the external factors that may influence commodity and food prices, suggesting possible upticks in the coming months. However, aligned with OCBC’s prediction, they foresee the OPR remaining untouched at 3%, provided inflationary rates fall within the government’s forecasted range of 2.1% to 3.6%.

Similarly, MIDF Research projects a 3.2% inflation rate for 2024, basing its anticipation on a series of policy implementations expected to gradually elevate price levels in the first half of the year. Key considerations include adjustments in utility charges, a hike in sales and service tax rates, and the introduction of a tax on low-value goods. The latter half of the year could see further impacts from the proposed roll-out of a targeted fuel subsidy, potentially leading to increased retail fuel prices.

MIDF Research forecasts a move towards a managed-float price mechanism for RON95 fuel, supported by monetary compensation for eligible individuals. This approach, along with continued economic monitoring and adjustments by the Central Bank, is expected to sustain stability, with no changes anticipated for the OPR throughout 2024.

As Malaysia moves closer to 2024, these economic forecasts offer essential insights into the potential fiscal landscape, outlining pivotal factors that could influence the inflation trajectory. Understanding these variables will be crucial for policymakers, businesses, and consumers alike as they navigate the challenges and opportunities of the coming year.

Jordan Clark
Jordan Clark
Jordan Clark brings a dynamic and investigative approach to business reporting. Holding a degree in Business Administration and a certification in Data Analysis, Jordan has an eye for detail and a knack for uncovering the stories behind the numbers. His career began in the bustling world of Silicon Valley startups, giving him firsthand experience in tech entrepreneurship and venture capital. Jordan's reports often focus on technology's impact on business, startup culture, and emerging

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