Malaysia: Inflation seen contracting 0.5% in 2020 – UOB

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

Key Quotes

“Headline deflation widened to -1.4% y/y in Aug (from -1.3% y/y in Jul), matching our estimate (-1.4%)… Aug’s higher deflation rate largely reflected lower electricity bills, housing rental, and fuel prices, which more than offset the rise in prices of food away from home, airline tickets, and jewelleries.”

“Year-to-date, consumer price index (CPI) declined by -1.0% in the first eight months of 2020 (Jan-Aug 2019: +0.5%). This alongside expectations of easing deflationary pressures over the next few months suggests that our 2020 full-year CPI projection of -0.5% remains attainable (BNM forecast: -1.5% to +0.5%). Going into 2021, inflation is projected to return to positive territory at 2.1% (BNM forecast: 1.0%-3.0%). Volatile global oil prices and bumpy economic recovery would be wildcards for the inflation outlook.”