KUALA LUMPUR, July 23 (Xinhua) -- Economists hold mixed views on Malaysia's inflation outlook this year amid the impacts of sales and services tax (SST) and other policy developments.
Maybank Investment Bank said in a note on Wednesday that with the country's average inflation rate of 1.4 percent in the first half, its full-year 2025 inflation forecast of 2 percent implies upside risk to inflation in the second half.
This is because the research house factored in the impact of the SST as well as the electricity tariff review (effective on July 1), full compliance with the new minimum wage (from Aug. 1), RON95 petrol subsidy rationalization (implemented in the second half), and higher foreign labor costs.
MBSB Research, however, adjusted Malaysia's inflation forecast lower in light of the latest policy developments.
"We adjust our 2025 CPI inflation projection to 1.8 percent, considering the sustained moderate inflation reading and weaker cost pressures in the recent months as well as the delay in the RON95 (petrol) subsidy adjustments, which may lead to a more gradual pickup in inflation than initially forecasted," the research house said in a note on Tuesday.
Overall, MBSB projects that higher price pressures will predominantly be driven by supply-side factors, particularly those arising from the expanded SST implementation.
Complementing this, additional demand-side pressures could also grow following the recent overnight policy rate (OPR) adjustment, which may encourage larger consumer expenditures on the back of resilient labor market conditions, with healthy employment and wage growth, it added.
Meanwhile, Hong Leong Investment Bank Research said in a note on Wednesday that it maintained Malaysia's full-year inflation rate at 2 percent.
The research house sees limited direct impacts on inflation from fiscal reforms such as the SST and electricity tariff adjustments for households.
"Price pressure from global commodities, particularly crude oil, is expected to remain subdued, amid persistent signs of oversupply in the market," it added. ■
