Inflation seen moderating on weaker demand, slower policy rollout
KUALA LUMPUR: A potential delay in policy reforms, due to softening domestic activity and external demand risks, is expected to moderate inflation growth in the near term, said CGS International Research.
The research house said recent macroeconomic data showed a decline in domestic demand, while tariff threats from United States presidential candidate Donald Trump may further weigh on sentiment.
As a result, it expects the Malaysian government to adopt a more cautious approach in implementing reform policies.
"Given the modest consumer price index (CPI) growth, softer global commodity prices, and delay in price reforms, we revise lower our 2025F CPI growth forecast to 2.0 per cent year on year (yoy) from 2.3 per cent previously.
"Trend-wise, we still think prices will begin to elevate from the second half of 2025 onwards towards 2026," it said in a note.
Meanwhile, CGS International believes there will be minimal impact on inflation following removal of eggs subsidy.
On April 30, the Agriculture and Food Security Ministry announced that Malaysia would discontinue price controls on eggs starting May 1, as part of the government's gradual adjustment of subsidies.
CGS International Research said the decision to lift price controls signals that input costs and egg supply have stabilised.
"As such, we believe the potential for future price spikes in eggs is unlikely despite the removal of price caps. In terms of fiscal, we estimate this could save the government around RM400 million in 2025 subsidy expenses.
"Overall, we think this may lead to a minimal impact on 2025F CPI (eggs portion in the CPI basket is only 0.4 per cent)," it added.
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