Malaysia: Deflationary pressure persists – UOB

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

Key Quotes

“Consumer price index (CPI) continued to contract by -1.4% y/y in Sep (Aug: -1.4% y/y). This came in a tad lower than our estimate... The steady deflation rate was primarily due to the persistent decline in prices of non-food items (particularly fuel, electricity, purchase of vehicles, clothing & footwear, and accommodation services) that counterbalanced the rise in food products.”

“The overall inflation environment is expected to remain subdued and well anchored around Bank Negara Malaysia’s (BNM) target of -1.5% to +0.5% in 2020. This follows elevated unemployment, slower and uneven domestic economic recovery, and lower global oil prices. Year to date (YTD), deflation rate is at -1.0% in Jan-Sep. Given an extension of electricity bill discounts until end-Dec 2020 and the resurgence of COVID-19 cases, we revise our full-year deflation projection to -1.0% (from -0.5% previously). We project 2021 full-year inflation at +2.1% (BNM forecast: +1.0% to + 3.0%).”