Malaysia: Inflation stayed put in March – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in Malaysia.

Key Takeaways

“Headline inflation held steady at 2.2% y/y in Mar, matching our estimate but defying Bloomberg consensus of an uptick to 2.3%. The steady inflation reading was primarily due to the continued fuel subsidies that helped to bring down transport price inflation amid favourable base effects. It also helped to offset persistent rise in prices of other CPI components particularly food items.”

“Domestic demand continued to recover with both core and services inflation jumping further to more than two-year high of 2.0% and 1.6% respectively (from 1.8% and 1.5% in Feb respectively). This uptrend is expected to persist as Malaysia has transitioned into endemicity from 1 Apr with borders reopened to international travellers.”

“Overall, inflation risks are still tilted to the upside, going by a recovering economy, prolonged supply chain bottlenecks, elevated commodity prices, and a higher national minimum wage. The lapse of base effects particularly in electricity rates in 3Q22 and review of the government’s fuel subsidy mechanism are also sources of upside risks to the inflation outlook this year. We reiterate our 2022 full-year inflation projection at 3.0% (BNM est: 2.2%-3.2%, 2021: 2.5%).”