Malaysia: Deflation persisted in November – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the latest inflation figures in the Malaysian economy.

Key Quotes

“Malaysia’s deflationary pressures intensified to -1.7% y/y in Nov (from -1.5% y/y in Oct), which was steeper than our estimate (-1.5%) and Bloomberg consensus (-1.5%). This was largely due to the continuation of electricity bill discounts, sales tax exemptions for passenger vehicles, and lower fuel pump prices amid softer demand across most food and non-food items following the reinstatement of COVID-19 containment measures since Oct.”

“Year to date, deflation stood at -1.1% in Jan-Nov 2020. This suggests that Malaysia will likely see the year ending with an average of -1.1% deflation rate (vs. UOB and official forecasts: - 1.0%). That said, this deflation trend is expected to reverse course by 1Q21 as consumptioninduced incentives will lapse at end-Dec 2020, global oil prices are projected to stay above USD50/bbl in 2021, the economic recovery will be on a firmer footing once the vaccination starts to take place in Feb 2021, and the effects of year-ago low base comparison. We reiterate our 2021 full-year inflation target of +2.1% (official forecast: +2.5%).”