23rd May 2022 - 2 min read
MIDF Research has predicted that Malaysia’s food inflation will continue to rise in the foreseeable future. This is due to several factors, including higher global commodity prices, the weakening of the ringgit, and disruptions to the domestic supply chain.
“Global food inflation remains elevated, particularly the prices of corn, grain, and vegetables,” said the research house, which also noted that Malaysia is a country that imports more food than it exports – making it a net food-importing country. As such, the nation is susceptible to the effects of global shocks in the food chain supply.
Despite that, MIDF also believes that the overall inflationary pressure will remain stable as fuel inflation continues to be on the decline. The deceleration of fuel inflation will likely be more significant than the rise in food inflation, provided that the government maintains the current capped fuel prices of RON95 and diesel. This, in turn, will help to balance the situation out.
“In our thematic report ‘Oil Exports Rebound & Inflation Concerns’, we forecast that Malaysia’s headline inflation will stay below 3% even if food inflation averages at 5%, while fuel prices are capped at current levels. Unless average food inflation surges to 10%, overall inflation is expected to average at 4.6%,” MIDF further said.
To note, headline inflation is described as the calculation of inflation that includes commodities such as food and energy, whose prices are volatile. In contrast, core inflation is calculated without including food and energy prices.
Finally, MIDF noted that the average headline inflation could go up to 8.9% in a worst-case scenario, in which the government decides to float fuel prices, and food inflation averages at 10%.
(Source: The Edge Markets)
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