Will Malaysian Inflation Stay in a Downtrend in 2017?

Malaysian inflation

Inflation in Malaysia (EWM) is now in decline after reaching an eight-year high in March 2017. Inflation in May 2017 rose 3.9% on a YoY (year-over-year) basis, compared with its 4.4% increase in April 2017.

Inflation in May 2017 eased due to lower fuel (USO) (UCO) prices. The average gas price for May 2017 stood 2.09 RM (Malaysian ringgit) per liter, compared with 2.21 RM per liter in April 2017.

Will Malaysian Inflation Stay in a Downtrend in 2017?

Inflation in May 2017

Inflation in Malaysia appears to be on a decline in 2017, coming in slightly below the market expectation of 4% for May 2017. Inflation in May 2017 was at its lowest since January 2017, mainly due to the slowdown in the cost of transport, which resulted from reduced fuel prices. Inflation in May also declined for the third consecutive month this year.

Core consumer prices, which exclude energy and food prices, rose 2.6% on a YoY (year-over-year) basis, compared with the 2.3% rise one month previously. But consumer prices fell in May by 0.2% on a monthly basis, compared with the 0.3% drop in April.

Headline inflation, which includes volatile items like food and energy, dropped in May due to items like clothing, footwear, and transport. But prices rose for food and non-alcoholic beverages, alcoholic beverages, tobacco, housing, water, electricity, gas, and other fuels.

Expectations

Economic growth in Malaysia is expected to improve going forward, mainly supported by exports and improved domestic demand in 2017. Inflation remains a major concern for the Malaysian Central Bank due to the projected rise in oil prices. However, the recent slump in the oil prices should help keep inflation in a downtrend in 2017.

The country’s central bank recently left its benchmark overnight policy rate unchanged at 3% on May 12, 2017, to support the growth momentum gained in the first quarter of 2017.

Now let’s look at exports in Malaysia over the past year.