Malaysia: Inflation surprises to the upside in March – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest inflation figures in the Malaysian economy.

Key Quotes

“Headline inflation jumped to 1.7% y/y in Mar (from +0.1% y/y in Feb), slightly higher than our estimate (1.5%) and Bloomberg consensus (1.6%). It also marked the highest rate in nearly three years, largely driven by costlier food, transportation, furnishing & household equipment, and recreation & cultural services following the easing of COVID-19 containment measures a week after the national immunisation program kicked off on 24 Feb.”

“In 1Q21, inflation averaged +0.5% (vs. -1.5% in 4Q20 and +0.9% in 1Q20). There are no signs of supply-pushed inflation abating as yet, while the global economic recovery remains on track despite rising risks from new coronavirus variants and lingering supply shortage. Year-ago low base effects will also continue to play a role in lifting inflation amid the government’s pro-active measures to mitigate the impact of the supply-led inflationary pressures. We reiterate our 2021 full-year inflation projection of 3.0% (official forecast: 2.5%-4.0%; 2020: -1.2%).”

“The resurgence in COVID-19 infections and re-tightening of selective containment measures in the country this month (Apr) reinforce labour market slack and bumpy economic recovery in 2Q21. Underlying inflation remains muted with core inflation staying below 1.0% level for six months.”