HLIB Research expects inflation to be slightly higher going into 2024 at 2.6% compared with 2.5% for 2023.
PETALING JAYA: Economists are expecting the country’s headline inflation, as measured by the consumer price index (CPI) to rise this year.
This, they said, would be fuelled by the potential changes to domestic policies, higher food prices due to the El Nino effects, upside bias in crude oil prices and rising demand from improved economic growth prospects.
They are projecting the inflation rate to hover between 2.6% and 3.1% for this year, against 2.5% to 2.7% for 2023.
The recent data from the Statistics Department showed Malaysia’s headline inflation had eased to a 33-month low in November, with the CPI growth slowing to 1.5% year-on-year (y-o-y) from 1.8% y-o-y in the preceding month. This was due primarily to a sharp drop in food prices.
The November 2023 reading was lower than market expectations of a 1.7% y-o-y increase. For the first 11 months of 2023, the headline inflation averaged at 2.5%.
Hong Leong Investment Bank (HLIB) Research expects inflation to be slightly higher going into 2024 at 2.6% compared with 2.5% for 2023.
It said risks to the inflation outlook remain highly subject to potential changes to domestic policies.
According to Economy Minister Mohd Rafizi Ramli, the government will roll out a targeted subsidy programme for RON95 petrol in the second half of this year after the launch of the central database system.
“We think Bank Negara will maintain the overnight policy rate at 3% in 2024 as it adopts a wait-and-see stance to ascertain the durability and strength of underlying demand after the subsidy rationalisation programme kicks in along with the effects of proposed income measures,” the research house added.
Meanwhile, TA Research is estimating the CPI increase to average at 3.1% this year, compared with the average of 2.7% for last year.
Thef orecast took nto consideration the persistent increases in food inflation amid the lagged impact of El Nino weather conditions, upside bias in crude oil prices and the build-up of demand-side pressure in tandem with improved growth prospects.
Kenanga Research maintained its headline inflation forecasts at 2.5% for 2023 and 2.7% for 2024.
Separately, HLIB Research added that the US Federal Reserve held interest rates steady in the December 2023 Federal Open Market Committee meeting and signalled that inflation had eased faster than anticipated, opening the door to rate cuts next year.
According to projections, most officials had pencilled in three cuts for 2024.
“Consequently, we maintain our projection for the ringgit to appreciate to RM4.30 to the US dollar as at end-2024 against a 2024 average of RM4.44, after closing 2023 at RM4.59 to the dollar.
“This was within our forecast of RM4.60 compared to the average for 2023 at RM4.57 to the dollar,” it said.
