KUALA LUMPUR, July 22 ― RAM Ratings expects Malaysia’s overall inflation rate to accelerate to 1.6 per cent in June, fuelled by the low-base effects arising from the removal of the Goods and Services Tax (GST) last year.
In a statement today, it said the inflation rate had plunged to 0.8 per cent in June 2018 after the cessation of the GST, from 1.8 per cent the preceding month.
“The accelerated inflation this June is expected to be underscored by a more broad-based set of drivers.
“RAM has also revised its inflation projection for 2019 down to one per cent from the earlier 1.6 per cent,” said head of research Kristina Fong.
She said year to date, inflationary pressure has been weaker than expected, particularly from the food component and the reintroduction of the Sales and Service Tax last September.
It said the delayed implementation of targeted fuel subsidies, which would have elevated consumer fuel prices to market levels in the second quarter of 2019, represents another key contributing factor to its revision.
“Our sensitivity analysis indicates that for every one-month delay in the implementation of the scheme, headline inflation will change 0.05 percentage point from our base case,” she added.
“Iin the event the current price ceilings are retained when the targeted subsidies take effect, headline inflation will come in at a lower 0.8 per cent this year,” Fong added. ― Bernama
