Bank Negara Malaysia (BNM) has confirmed its inflation forecast for 2024, projecting a range of 2.0% to 3.5%, despite recent adjustments to fuel subsidies.
In a press briefing following the release of the second-quarter 2024 gross domestic product (GDP) figures, BNM Governor Datuk Seri Abdul Rasheed Ghaffour indicated that the impact of fuel subsidy rationalisation is expected to be manageable, thanks to government measures designed to mitigate cost increases for businesses.
The forecast range of 2.0%-3.5% already incorporates the effects of recent diesel subsidy changes and potential adjustments to RON95 subsidies, should those be implemented. Abdul Rasheed noted that the inflationary effect of higher diesel prices in Peninsular Malaysia as of June has been relatively contained, with minimal impact on the broader consumer price index (CPI).
“Based on data from the first half of 2024, we anticipate that headline inflation will likely remain below 3%,” said Abdul Rasheed. He also projected that core inflation for the year would stay within the 2.0%-3.0% range.
BNM’s data revealed that Malaysia’s headline and core inflation averaged 1.8% during the first half of 2024.
Abdul Rasheed highlighted that potential risks to inflation include the effects of additional domestic policy measures on subsidies and price controls, as well as fluctuations in global commodity prices and financial market conditions.
On June 10, Malaysia began a targeted rationalisation of fuel subsidies, starting with diesel. The retail price for diesel in Peninsular Malaysia was adjusted to RM3.35 per litre from RM2.15, with the government projecting annual savings of RM4 billion from this change. While a similar adjustment for RON95 gasoline is anticipated, it has not yet been implemented.
Additionally, the government aims to reduce the budget deficit to 4.3% of GDP this year, down from 5% in the previous year.
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