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A Malaysian flag is pictured at Dataran Merdeka in Kuala Lumpur September 15, 2021. — Picture by Yusof Mat Isa
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KUALA LUMPUR, Feb 25 — Malaysia's Consumer Price Index (CPI) is expected to remain encouraging in 2022 with a projected expansion of 2.4 per cent year-on-year (y-o-y), thanks to a full year impact of full economic reopenings, aided by favorable oil price movement.
Public Investment Bank Bhd said the CPI will also be driven by the lagged impact of eight Covid-19 fiscal stimulus packages which will boost consumption and investment activities.
"The expansion will also be underpinned by private-public initiatives that will create at least one million new jobs this year and the accommodative interest rate environment that should see the Overnight Policy Rate (OPR) remaining unchanged in the first half of 2022," it said in a research note today.
The investment bank said demand will be pushed further by various fiscal assistance like targeted financial transfers (Bantuan Keluarga Malaysia), special incentives (Sales and Service Tax-exemption for purchase of new vehicles) and specific initiatives (two per cent reduction in monthly employee Employees Provident Fund contribution).
“Inflation could exceed expectations, however, especially if supply disruptions are prolonged, but we expect it to normalise from mid-year onwards.
“Inflation may also reaccelerate should production bottle-necks in the manufacturing and mining sectors continue," it said, noting that headline inflation had increased by 2.3 per cent y-o-y in January 2022.
Public Investment noted that Malaysia’s CPI started the year on a steady footing, driven by the full economic reopenings as all states have transitioned into Phase Four of the National Recovery Plan (NRP).
Growth for the month was also aided by a favourable base effect following the tepid inflation last year (January 2021: -0.2 per cent), it said.
On a month-on-month (m-o-m) basis, the bank said CPI increased by 0.3 per cent, a slight pullback against December’s 0.4 per cent.
Meanwhile, Maybank Investment Bank tweaked its full-year 2022 inflation forecast to 2.7 per cent from 2.5 per cent previously, mainly on elevated food and beverages costs and food-related commodity prices.
It opined that the inflation rate eased to 2.3 per cent y-o-y in January 2022 on diminishing base effects, despite the higher prices of food and non-alcoholic beverages, but core inflation picked up 1.6 per cent y-o-y amidst pent up discretionary spending and services demand following the resumption of economic activities. — Bernama