KUALA LUMPUR, May 13 — Bank Negara Malaysia said the risk of Malaysia falling into deflation is limited despite the expectation of headline inflation to turn negative this year.

Governor Datuk Nor Shamsiah Mohd Yunus said for deflation to happen, the country would have to experience a prolonged and broad-based decline in prices, coupled with a collapse in demand.

"So far, we have not seen a widespread decrease in prices across goods and services, Only around 20 per cent of items in the Consumer Price Index (CPI) exhibited a price decline during the first quarter. And core inflation is also expected to remain positive,” she told reporters after announcing the country’s gross domestic product today. 

During the first quarter of 2020, headline inflation remained modest at 0.9 per cent, mainly reflecting the lapse in the remaining impact from Sales and Services Tax implementation and lower price-volatile inflation.

Core inflation moderated slightly to 1.3 per cent and likely to remain positive in 2020.

"The muted inflation this year will be due to primarily to lower oil prices. Overall, we expect prices to be supported as demand conditions are gradually improved. As we saw in the first quarter of this year, private consumption has been strong,” said Nor Shamsiah. — Bernama