KUALA LUMPUR (Jan 17): RHB Research predicted an uptick in Malaysia's headline inflation to 3.3% in 2024, against an estimate of 2.6% last year, amid a rise in Asean consumer prices.
The research house said the inflationary pressures domestically stem from policy changes, costlier commodity and food, and heightened demand-side pressure.
“Inflation risks (in Malaysia) are cushioned by steady food prices (partially due to the continuation of food subsidies and the release of buffer stocks).
“Uncertainties over consumer prices are also led by policy manoeuvres, especially the actual implementation timeline and magnitude of fuel price adjustment for diesel in 2Q2024 (second quarter of 2024), followed by RON95 in 2H2024 (second half of 2024),” it said in a note on Wednesday.
Meanwhile, RHB Research said it is seeing persistent signals for Asean consumer prices to accelerate higher in 1Q2024.
It attributed the reasons for the inflation heat in the Asean region to stronger demand-pull drivers, adverse weather and geopolitical conditions, as well as China’s economic recovery.
The research house is relatively sanguine regarding global economic growth in 2024, stating that catalysts for its view included rate normalisation which may materialise in 2H2024, dissipation of inflation risks over the same period towards key central banks’ objectives, and China’s potential economic recovery in 2024.
It looks for an acceleration in global growth this year, led by further recovery in the US and China economies.
“We expect US and China GDP (gross domestic product) growth to come above consensus at 2.2% and 5.0%, respectively. We expect global growth to be underpinned by manufacturing and trade activities, a phenomenon that has already materialised in 2H2023,” it said.
According to RHB Research, the higher commodity prices are underpinned by China’s economic recovery, which surpassed market estimates when its GDP growth for 3Q2023 rose 1.3% quarter-on-quarter on a seasonally adjusted growth basis, translating to a 4.9% year-on-year growth over the same period.
Malaysia, Vietnam, Singapore, and Thailand are likely to experience improved trade and tourism opportunities, particularly in the electrical and electronics (E&E) trade, due to China's economic momentum recovering in 2024, it said.
“The positive spillover effects on Asean’s growth via the tourism and export mechanisms reinforce our view of demand-led inflation in Asean, which should eventually spill over to US inflation in the quarters ahead,” it added.
Separately, it stated that food prices will likely point higher, exacerbated by India’s rice export ban and El Nino weather conditions, which threaten favourable harvesting conditions.
Global inflation may also heat up further on the back of unpredictable geopolitical tensions, it said.