RHB IB Revises Downward 2024 Inflation Projection To 2.1 Pct

KUALA LUMPUR, Aug 22 (Bernama) -- RHB Investment Bank Bhd (RHB IB) has revised its 2024 headline inflation projection downward to 2.1 per cent from a previous 2.6 per cent forecast.

It expects core inflation to average 2.0 per cent in 2024, RHB IB said in a note today.

“This revision is based on the muted impact of diesel price adjustments and utility tariff changes on headline inflation, the delay in RON95 petrol subsidy rationalisation until the end of 2024 (at the earliest), and slower-than-expected inflation on a year-to-date basis,” said RHB IB.

It said inflation pressure remains manageable, with headline inflation rising by 1.8 year-on-year (yoy) for the first seven months, compared to its earlier projection of 2.1 per cent yoy for the same period.

“Additionally, our previous projection accounted for a potential upside in the headline consumer price index from a revision in services tax, with an expected impact of 0.3 per cent – 0.6 per cent.

“At this point, the effect of services tax adjustments on headline inflation has been minimal, with no significant upsides observed since its implementation on March 1.

“Thus, we expect headline inflation to remain stable at 2 per cent to 2.3 per cent yoy for the remainder of the year, assuming a delay in RON95 fuel price adjustments,” it said.

RHB IB said the inflation trajectory will hinge on the RON95 subsidy rationalisation timeline and its quantum of price adjustment, potential demand upsides from partial pension fund withdrawals and the spill-over impact from higher global commodity and food prices.

“A planned increase in civil servant salaries (effective December 2024) could also increase demand-pull inflation pressure.

“We will remain attentive to any potential fiscal consolidation measures (including details on RON95 subsidy retargeting) announced during the Budget 2025 tabling, scheduled on Oct 18,” it added.

RHB IB said the government may assess the lagged impact of diesel price adjustments and other fiscal measures, such as revisions in services tax and utility tariffs, on the inflation trajectory and economy before implementing RON95 petrol subsidy rationalisation.

Meanwhile, MIDF Amanah Investment Bank Bhd (MIDF Research) said it is maintaining its outlook for a gradual rise in headline inflation across Peninsular Malaysia in the second half of 2024.

“Although inflation stabilised in July 2024, we continue to anticipate rising inflationary pressures across all states, largely influenced by the implementation of the targeted diesel subsidy.

“Nevertheless, we expect this upward pressure to remain contained, and supported by targeted government incentives for selected and eligible industry players and proactive actions to monitor price changes,” MIDF said.

“We maintain our expectations that the targeted RON95 subsidy will commence in 4Q 2024, and the relatively moderate price increases in the earlier part of 2024 suggest that policy changes spillover have been limited so far,” it added.

It foresees inflation at a moderate 2.3 per cent in 2024.

-- BERNAMA