This article first appeared in The Edge Financial Daily, on January 29, 2016.

PUTRAJAYA: Inflationary pressure is not expected to hinder the government’s measures introduced in the Budget 2016 revision to increase people’s spending.

CIMB Investment Bank Bhd director and chief economist for Malaysia Maslynnawati Ahmad said higher inflation should not be a roadblock for the government’s measures to spur domestic demand.

“This (revised Budget 2016’s measures) is a mild positive surprise. Higher inflation is something already expected, and I think consumer sentiment should improve slightly and stabilise soon, albeit still at [a] low level,” she said yesterday.

Meanwhile, Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz said the central bank is estimating this year’s inflation to range between 2.5% and 3.5%, with expectations that it could go beyond 4% in the first quarter.

She said the estimate was made based on price hikes following the subsidy rationalisation measures last year. “But this will be offset by the fall in oil prices.”

Zeti also said BNM will monitor foreign exchange movement to ensure that this will not further affect product prices.

The Consumer Price Index increased 2.1% year-on-year in 2015, as the sharp fall in oil prices helped to relieve the effect of the goods and services tax implemented in April.

According to the Malaysian Institute of Economic Research (Mier), the consumer sentiment index fell to an all-time low of 63.8 points in the fourth quarter of 2015 (6.4 points lower than the previous quarter), the sixth consecutive quarterly drop.

Mier said the people’s confidence is further shaken by worsening financial conditions. Consumers are concerned about job security and higher prices.