Subsidies protect Malaysians from rising inflation, economists say

According to economists, Malaysia is in an “envious” position as fuel subsidies protect households from rising oil prices.

“Although we see this accelerating inflation, especially higher inflation towards the second half of the year, these fuel subsidies have somehow protected households,” said Reed’s Sian Fenner advisory firm Oxford. The Asian Economist of Economics is CNBC’s “Street sign asia“On Wednesday, she predicted that strong household spending would continue to be a major driver of growth in 2022.

For Malaysia, “rising oil prices and rising energy prices … mean they also earn higher incomes,” she said.

Nevertheless, while the government receives royalties and dividends from Malaysian oil and gas company Petronas, which can bear the cost of subsidies, it considers how to “rationalize” or reduce those subsidies. She said she needed it.

Inflation outlook

Fenner predicted that inflation would remain fairly high over the next two years.

She further stated that Malaysia’s manufacturing, construction and palm oil industries are facing labor constraints despite the reopening of their borders.

She added that these pressures on the labor market should be eased in the second half of 2023, but they are the “definite headwinds” that the country is currently facing.

“Inflationary pressures are increasing, which means that not only food, but also energy and transportation, as well as recreation and accommodation,” said Cyan Fenner, an economist at Oxford Economics. rice field.

Bloomberg | Bloomberg | Getty Images

The shortage of unskilled workers is beginning to ease, but rising wages present a dilemma for Malaysia’s central bank in terms of interest rates, she added.

Later Wednesday, Malaysia raised its key interest rate by 25 basis points to 2.25% to curb inflation. This is the second rate hike this year.

“Inflation accelerated in May, and the consequences of inflation are increasing inflationary pressures, not just food. Not just on the energy and transport sides, but also on recreation. We’re on the move, and the accommodation, and that’s really the effect of the reopening, “Fenner said.

The Malaysia’s political uncertainty, which is expected to be announced shortly, is a “continuing risk,” she said, and companies “cross the fence” to see how the situation unfolds. I added that I would go.

Subsidies protect Malaysians from rising inflation, economists say

Source link Subsidies protect Malaysians from rising inflation, economists say

Back to top button