Rise in Asia's consumer prices to remain at single digit

KUALA LUMPUR (Sept 21): The rise in Asia’s consumer prices is expected to remain at a single digit as dependency on imports is lower between 30% and 40%, said an economist.

Juwai IQI global chief economist Shan Saeed told Bernama that Asia produces many things including agriculture, oil, and manufacturing. Hence, the impact on the rise of consumer prices is minimal compared with advanced economies.

“Consumer prices will rise higher, in double-digits, in advanced economies compared to the Asia region where it is going to remain at a single digit.

“This is because advanced economies produce less and their import contributes to 60%-70% of the macro equation,” he said.

Shan also noted that strong demand, rising energy prices, labour shortages and supply chain hiccups would keep inflation higher in first-world countries but lower in Asian economies.

He said this in reference to the International Monetary Fund’s projection that consumer prices are expected to rise by 8.3% globally this year.

According to a media report, consumers and businesses worldwide are facing sharper prices and inflation surged after countries emerged from Covid-19 lockdowns.

Global inflation has also soared since the Russian invasion of Ukraine in February this year.

Meanwhile, he said the global economy is in stagflation and inflation will remain in the global economy for the next two years.

The economist said, however, that the situation in Malaysia is still manageable and the government is doing its utmost to maintain macroeconomic stability to have economic confidence in keeping the momentum intact.

“Consumption is still strong, and foreign direct investments are coming into the country.

“The numbers from the Ministry of International Trade and Industry (MITI) and the Malaysian Investment Development Authority (MIDA) are coming out strong for August.

“So, the Malaysian government is still achieving the desired goals of achieving growth over 7% this year,” he said.

Malaysia has attracted RM123.3 billion worth of approved investments in the manufacturing, services and primary sectors involving 1,714 projects from January to June 2022 and 57,771 job opportunities are expected to be created in the country.

MIDA said foreign direct investments remained the major contributor — at 70.9%, or RM87.4 billion — while investments from domestic sources contributed 29.1% amounting to RM35.9 billion (US$8.2 billion).

As of August 2022, there are 276 projects with proposed investments of RM25.1 billion within MIDA’s pipeline; 198 projects are from the services sector (RM13.7 billion) while 78 projects are from the manufacturing sector (RM11.4 billion).

Commenting on how Malaysia could overcome or minimise the impact of global inflation and consumer prices this year, Shan said Bank Negara Malaysia has got a policy lever to tame inflation.

“It takes 12 to 15 months for every policy lever to impact the economy. Discount rate/overnight policy rate (OPR) at 2.5% is good to support the economy for the next quarter,” he said.

Shan explained that as of early September 2022, the majority of central banks worldwide had carried out rate hikes, some small and others rather large.

“There are 83 central banks globally that have raised rates this year and seven central banks are going to hike soon.

“On average, 150 basis points have been raised by central banks signalling inflation is serious in many economies,” he said.