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MIDF Research: Prolonged weakness in ringgit and surge in petrol and diesel prices may risk Malaysia’s PPI and CPI in 2024

Publish date: Wed, 29 Nov 2023, 12:06 PM

KUALA LUMPUR (Nov 29): Prolonged weakness in the ringgit and a surge in petrol and diesel prices may risk Malaysia’s producer price index (PPI) and consumer price index (CPI) in 2024, despite analysts foreseeing low inflationary pressure to persist at least until the first half of 2024 (1HCY2024), said MIDF Research in a note on Wednesday.

The research house attributed the low inflationary pressure environment to improvements in the domestic supply chain, the stabilisation of interest rates, and the normalisation of global commodity prices.

However, MIDF Research cautioned that there are downside risks for Malaysia’s PPI and CPI in 2024, including the prolonged weakness in the ringgit and a potential surge in petrol and diesel prices following subsidy rationalisation efforts.

Suttinon Panyo played consistent golf as he led from wire-to-wire to win the prestigious Toyota Tour Championship co-sanctioned by the Asian Development Tour, by a comfortable three strokes over India’s Khalin Joshi at Saujana Golf & Country Club here today.

On Monday (Nov 27), Economy Minister Rafizi Ramli said the government will roll out its targeted subsidy programme for RON95 petrol in the second half of 2024.

Meanwhile, earlier this month, Rafizi said in the Dewan Rakyat that targeted subsidies for petrol and diesel are likely to be introduced next year, after the launch of the central database system known as Padu in January 2024.

According to data released by the Department of Statistics Malaysia (DOSM), Malaysia’s PPI experienced a year-on-year (y-o-y) decline of 0.3% in October 2023, marking a reversal from the 0.2% growth recorded in September 2023.

This downturn was led by a moderation in PPI inflation for crude materials, which grew by 5.3% y-o-y, slightly lower than the 5.4% recorded in September 2023. 

Intermediate goods also continued their seven-month deflationary trend, declining by 3.0% y-o-y.

Meanwhile, input inflation for finished goods softened to a 16-month low, increasing 2.2% y-o-y, said MIDF.

Comparing month-on-month (m-o-m) figures, the overall producer prices fell by 0.3%, with intermediate materials costs dropping by 0.2% m-o-m and finished goods costs dropping by 0.6% m-o-m.

However, prices of crude materials remained unchanged on a m-o-m basis.

Over the first ten months of the year, Malaysia's overall PPI recorded a y-o-y decline of 2.0%, while the input inflation for crude materials and intermediate materials registered a 11.4% and 0.8% y-o-y decline, respectively.

At the same time, the finished goods recorded a 3.4% y-o-y increase.

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