Malaysia: Inflation unchanged in August – UOB

Headline inflation maintained at 2.0% y/y in Aug, matching Bloomberg consensus but coming in a tad lower than our estimate of 2.1%. The steady inflation rate was largely thanks to favourable base effects and a continuation of government subsidies particularly on fuels, chicken, eggs, and cooking oil. This helped to counterbalance the significant rise in prices of some essential food items (i.e. rice, fresh meat, and fish & seafood), water and electricity bills, pharmaceutical products, transport services, and education during the month. 

We stick to our view that inflation will likely hover around 2.0% in the remainder of the year, keeping our 2023 full-year inflation forecast of 2.8% intact (BNM est: 2.8%-3.8%, 2022: 3.3%). For 2024, upside risks to the inflation outlook has heightened as global energy prices rebound to above USD90/bbl levels and the effects of El Nino on staple food especially rice become more imminent, in addition to the Malaysian government’s plan to rationalize its subsidies next year. While awaiting the detailed announcement on subsidy rationalization by the government, we keep our 2024 full-year inflation forecast unchanged at 2.8% for now.