KUALA LUMPUR (Oct 7): Malaysia’s inflation rate is forecast to range between 2.8% and 3.3% in 2023, compared with 3.3% estimated for 2022 and 2.5% in 2021, according to the Ministry of Finance in its 2023 Economic Outlook report.

Headline inflation, or the consumer price index (CPI), averaged at 3.1% in January to August, having touched a high of 4.7% year-on-year for the month of August, from a year ago. 

The 3.3% forecast for the whole of 2022 compares with Bank Negara Malaysia’s headline inflation forecast of 2.2% to 3.2% as of July this year. The central bank sees core inflation at 2%-3% in 2022, according to its statement in September.

For 2023, the headline CPI forecast by the Government marks the highest range since 2017, when the country recorded a full-year CPI of 3.8%, Bloomberg data showed.

The Economic Outlook report said that inflation would be driven by stable commodity prices and a gradual move towards a targeted subsidy mechanism in ensuring a more equitable distribution of resources.

While the provision of additional consumption subsidies and cash assistance cushioned the impact of inflation on the people, the report warned that over-reliance on short-term policies could adversely affect the fiscal manageable level.

Rising food prices, mainly due to supply-chain disruptions, following the Russia-Ukraine conflict, have affected Malaysians, particularly low-income groups, it said.

Moving forward, it is imperative for the Government and the private sector to work together in enhancing national food productivity towards ensuring food security in the long term, it added.

Read more stories from the Economic Report 2022/2023 here.