Govt To Maintain Fuel Prices Until End 2023 Says Midf Research

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MIDF Research foresees the government to keep retail fuel prices unchanged to reduce overall inflationary pressure.PETALING JAYA: MIDF Research expects the government to keep retail fuel prices status quo at least until the end of 2023, subsequently reducing overall inflationary pressure moving forward.
The research house said this following the deceleration of June 2023’s headline inflation which moderated to 2.4% year-on-year (y-o-y), the slowest rate since April 2022, along with a lower non-food inflation rate which inched down marginally to 1.2% y-o-y.
According to MIDF Research, fuel price growth shrank by 3.8% y-o-y in June 2023, the weakest since March 2021. The decline followed the normalisation of commodity prices and high base effects.
“We believe the government would keep the current fuel subsidy mechanism status quo, particularly on RON95 and diesel, at least until the end of 2023.
“Hence, we foresee fuel inflation to stay on a deceleration path and reduce the overall inflationary pressure,” it said in a statement today.
Currently, the retail price of RON95 is RM2.05 per litre and diesel at RM2.15 per litre.
On food inflation, which softened to a more than one-year low of 4.7% y-o-y in June 2023, MIDF Research expects Malaysia’s domestic food inflation to decelerate further following the mild correction of global commodity prices, particularly agriculture-related prices, and improving regional and domestic supply chains.
“As a net importer of food, Malaysia is highly exposed to external factors and currency movements.
“Apart from the depreciating ringgit, Malaysia’s food prices are exposed to Russia’s recent withdrawal from the grains deal, El Nino impacts, and food export policy changes by other countries,” it said.
On the overnight policy rate (OPR) adjustments, MIDF Research opined that the steady domestic demand, coupled with sticky core inflation which lingered above 3% y-o-y in June 2023, may lead Bank Negara Malaysia to consider another 25 basis-point hike in the second half of 2023.
Overall, it maintains its consumer price index forecast at 3% for 2023. - FMT

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