Inflation Likely To Rise If T20 Excluded From Fuel Subsidies, Says Investment Bank

Auto News
Anis | 31-05-2023 10:15 AM

1966538.jpg

According to PIVB, without petrol subsidies, the actual price of RON95 would be around RM3.22 per litre, up from the current RM2.05 per litre.
According to Public Investment Bank Bhd (PIVB), eliminating fuel subsidies for the top 20% of income earners (T20) would raise inflation by an additional 0.45-0.75 percentage points (ppts) per year. In a a note issued yesterday by the investment bank, while headline inflation, which includes food and energy prices, has been trending downward in recent months, owing primarily to the easing of various cost factors, core inflation (which excludes food and energy prices) is expected to remain elevated due to the country's strong demand. "Continued price controls and fuel subsidies will act as partial mitigating factors, limiting the extent of inflationary pressures."

2086488.jpg


"However it is critical to recognise that the inflation outlook has a significant risk bias to the upside, remaining acutely vulnerable to potential shifts in domestic policies pertaining to subsidies and price controls, as well as developments within financial markets and global commodity prices," the report read.

According to PIVB, without petrol subsidies, the actual price of RON95 would be around RM3.22 per litre, up from the current RM2.05 per litre.

"We believe that the subsidy ceilings for RON95 and diesel, which are currently set at RM2.05 and RM2.15 per litre, may be subject to review and potentially increased gradually in the latter part of the year," the statement said. With the implementation of targeted fuel subsidies for RON95 petrol and diesel next year, Deputy Finance Minister Datuk Seri Ahmad Maslan reportedly stated on May 19, 2023 that T20 group earners will no longer enjoy benefits meant for lower and middle-income earners.

2099669.jpg

The Department of Statistics Malaysia (DoSM) announced last Friday that the consumer price index (CPI), which measures inflation, grew at a slower rate of 3.3 percent year on year (y-o-y) in April 2023, down from 3.4 percent y-o-y in March 2023, while core inflation also slowed to 3.6 percent y-o-y in April 2023, down from 3.8 percent in March 2023. Moving forward, PIVB forecasted that headline inflation in Malaysia would average between 3.0 and 3.5 percent in 2023, compared to the Bank Negara Malaysia (BNM) and Finance Ministry (MoF) forecasts of 2.8 - 3.8 percent, with the caveat that any changes to the retail oil price cap or the implementation of price control measures could affect its projection. On the overnight policy rate (OPR) adjustment, the investment bank expected BNM to take a wait-and-see approach, particularly in light of significant central bank developments.

image.png

"Should Malaysia's domestic economy outperform expectations, it is not implausible that BNM will seek to optimise its monetary arsenal by raising the statutory reserve requirement (SRR) from 2% to 3% in the first half of 2024," it said. At its May 2-3 Monetary Policy Committee meeting, the central bank raised the overnight policy rate (OPR) by 25 basis points to 3%.  Source: NST, Malay Mail


Leave Your Comments
Subscribe to Newsletter
Car Recommended For You
Is your income hurting your decision to purchase a new car?
Worry not, Elysia, our Search Hero, will provide you with solutions for finding your dream car within your given income range!
Income Range
Monthly Installment (5 Years)
Car Models
Below RM 2,000
488 Models
RM 200 - RM 400 / Month
RM 2,000 - RM 2,500
478 Models
RM 300 - RM 500 / Month
RM 2,500 - RM 3,000
480 Models
RM 400 - RM 600 / Month
RM 3,000 - RM 3,500
487 Models
RM 500 - RM 700 / Month
RM 3,500 - RM 4,000
433 Models
RM 600 - RM 800 / Month
RM 4,000 - RM 4,500
398 Models
RM 700 - RM 900 / Month
RM 4,500 - RM 5,000
384 Models
RM 800 - RM 1000 / Month
Above RM 5,000
1110 Models
RM 1000+ / Month
Comparison 0