KUALA LUMPUR – MIDF Research has maintained Malaysia’s Consumer Price Index (CPI) inflation forecast at 1.8% in 2021, with the inflation rate trending upwards as oil price increases and demand returns.
In a note today, the research firm said inflationary pressure was largely muted in 2020, due to weak demand and government rebates through the electricity discount bills.
MIDF Research said although the electricity rebates will continue until June this year, the quantum was lower than what was given last year, hence, it foresees the inflation at +1.8% year-on-year (y-o-y) in 2021.
This year, prices are expected to increase on the back of higher crude oil prices and returning demand as the economy recovers, facilitated by a low-interest rate environment, it said.
“The rollout of Covid-19 vaccines in the country will likely improve sentiments and encourage spending on discretionary items with better income prospects in the later part of the year,” it said.
In general, it said the uptrend in global oil prices has pushed inflation higher with most of the key countries recording an increase in CPI, in line with global oil prices movement.
European Union countries registered inflation of +0.9% y-o-y in January 2021, reversing the deflation trend for the past five months, while the United States maintained its inflation rate at +1.4% y-o-y, unchanged from the previous month.
Among Association of Southeast Asian Nations (Asean) countries, the Philippines and Singapore observed higher inflation while Indonesia inched slightly downward, it said.
Earlier today, the Statistics Department announced that Malaysia's CPI declined 0.2% to 122.1 in January 2021, from 122.4 in the same month last year.
MIDF Research said the significant improvement could be attributed to two key indices: housing and utilities, and transport (contributing 38.4% of the CPI weight) which recorded a substantial lower fall in prices.
The research house noted that deflation remained in fuel-related items as prices continued to decline in January but stayed on an improving trend at -10.1% y-o-y (December 2020, -16.2% y-o-y), reflecting the movement in domestic retail fuel prices.
It anticipates the trend to stay in February with global oil prices increasing this month, with prices for the first three weeks averaging higher at US$61.60 (RM248.98) per barrel.
MIDF Research said Selangor, Putrajaya, Kuala Lumpur, Terengganu, Kelantan, and Pahang also observed an increase in CPI, with Terengganu chalking the highest rate of +0.3% y-o-y.
It said price increases in the east coast could be due to flood incidences which had caused disruption in the food supply, among others, as food and beverages inflation were also the highest recorded in these states. – Bernama, February 24, 2021
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