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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest inflation figures in Malaysia.

Key Quotes

“Headline inflation accelerated to a 4-year high of 4.7% y/y in Apr (from +1.7% y/y in Mar), largely due to transitory factors (i.e. higher commodities prices and food supply disruptions) and the lapse of electricity rebates that were introduced last year to relieve consumers’ burden during the fight against the COVID-19 pandemic. It also came amid the implementation of tighter COVID-19 containment measures and price control scheme for Hari Raya Aidilfitri during the month. Apr’s inflation rate was below our estimate (+5.9%) and Bloomberg consensus (+4.9%).”

“Consumer price inflation averaged 1.6% in the first four months of 2021 (Jan-Apr 2020: -0.04%), implying that our full-year inflation target of 3.0% remains achievable (official forecast: 2.5%- 4.0%; 2020: -1.2%). Headline inflation is projected to reverse course and come off to below 4.0% levels from Jun onwards. Rising pandemic-related risks and a weak labour market will continue to mitigate the impact of supply-led inflationary pressures, keeping overall inflation in check.”