I'm sure that some of you would have heard from family and/or friends talking about Malaysia's "actual" inflation rate "supposedly" being much higher then the figures released by the Government. In my previous article, I wrote about the basics of GDP and it's relationship with inflation, this article would be about my own attempt to decipher the real "inflation rate" of our beloved country!
Malaysia's Inflation Rate as what we read on the Papers/Website:
Year
|
Inflation Rate
|
2003
|
1.07%
|
2004
|
1.42%
|
2005
|
2.94%
|
2006
|
3.62%
|
2007
|
2.03%
|
2008
|
5.40%
|
2009
|
0.60%
|
2010
|
1.70%
|
2011
|
3.20%
|
2012
|
1.20%
|
In terms of global ranking (lowest to highest inflation), Malaysia ranks 27 out of 224 countries. Looking from that perspective, many would consider Malaysia an affordable place to live in due to it's low inflation rate as compared to neighbors such as Thailand (ranked 80 at 3.10%) and Singapore (ranked 122 at 4.40%).
The real reason behind our consistently low inflation rate is due to the price subsidy that our Government provides on certain consumer goods. If you remember my previous article about inflation, the Consumer Price Index is dependent on the price of consumer products and services which would then reflect upon the inflation rate of the country. When price of consumer products and services go up, so would the inflation rate of the country and vice versa.
While I laud the effort of the Government in trying to ensure that the "rakyat" is able to afford the basic consumers products, these subsidies are slowly eating into our country coffers. The very fact that we are the only Asian country that provides able to provide substantial subsidy for consumer goods is due to our good old Petronas natural resources (mainly oil). Imagine what would happen if our natural resources were to deplete 20 years from now?
READ HOW Invest Made Easy DERIVE THE ACTUAL INFLATION RATE FOR MALAYSIA HERE
Created by Shane My | Dec 06, 2020
Hi KC, what do you think about the removal of subsidies completely? Could it be happen?
2013-02-25 14:30
completely i think for the moment is impossible. Hyperinflation will set in immediately! Even US' fiscal cliff is a no go! Recession will bite hard.
2013-02-25 14:39
Just refer to the Hokkian Mee Price nearby your house and you will easily notice whether it is inflation or not.
2013-02-25 14:42
but there is a fine line between inflation calculation and greed.
sugar price up 20 sens, mamak teh tarik from 1.50 to 1.90! inflation or greed/both?
2013-02-25 14:49
Thanks KC for your explanation. But the reduction of subsidies gradually will make more people suffer enough especially for those fresh grad who just stepped into the society and try to live independently. The income/salary for fresh grad is way too low.
2013-02-25 15:00
boleh land #1 problem is corruption, any initiative incl this one is greatly impacted by the inability of fighting corruption; as it often "eat" from top to bottom. at such, it is often difficult to justify whether which subsidies r truly bad, while majority with low salaries but million & million of bunglow still sell like no body business
morale of the story, keep yr wallet tied!
2013-02-25 15:06
A point to ponder for everyone. Based on the calculation, the actual inflation rate for Malaysia is rather high in comparison to the neighboring countries. There's two possibilities here. One, the calculation is inaccurate. The other, the actual price of consumer products subsidized is not as high as the what the data indicates.
2013-02-25 17:02
Thanks Shane for your blog which it really broaden my knowledge, could you further explain on your assumptions of why "the actual price of consumer products subsidized is not as high as the what the data indicates"
2013-02-26 10:56
KC Loh
to say malaysia is the only Asian country that provides subsidy for consumer goods is wrong!
http://www.bangkokpost.com/business/economics/227910/thailand-urged-to-cut-subsidies
http://www.amcham.or.id/nf/features/3191-soybean-group-pushes-subsidy
2013-02-25 14:14