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

Key Quotes

“Malaysia ended 2020 with a smaller deflation of 1.4% y/y in Dec (vs. -1.7% y/y in Nov), in line with our estimate (-1.3%) and Bloomberg consensus (-1.3%). Higher prices of selected staple food items, alcoholic beverages, furnishing & household appliances, and fuel were major factors tempering a steep decline in headline CPI last month, amid a continued electricity bill discount and sales tax exemptions for passenger vehicles.”

“For the full year, headline inflation averaged at -1.2% in 2020, which was also in line with our projection of -1.1% and official forecast of -1.0%. We expect inflation to return to positive territory by 1Q21 and to average higher at 2.1% for the entire year of 2021 (official forecast: +2.5%). This is mainly based on the assumption of economic recovery post containment measures and inoculation, firmer global oil prices, and favourable statistical comparison base effects.”