MOF keeps to inflation forecast despite diesel subsidy rationalisation

Saturday 23 Nov 2024

KUALA LUMPUR (June 13): There is no change to the Ministry of Finance's forecast for inflation despite the diesel subsidy rationalisation that came into force on Monday, according to Treasury Secretary General Datuk Johan Mahmood Merican.

Johan said it is reasonable to anticipate that the inflation rate will remain aligned with the MOF’s inflation target of between 2% and 3.5% for 2024. Malaysia's inflation rate slowed to 2.5% in 2023, from 3.3% in 2022.

“Yes, we have increased [the diesel price] quite sharply from RM2.15 to RM3.35 [per litre], but at the same time we are allowing the logistics vehicles [in Sabah and Sarawak] to continue at [a subsidised rate of] RM2.15,” Johan told a panel session here, during the second day of Bank Negara Malaysia’s (BNM) Sasana Symposium 2024.

“In fact, there are 400,000 vehicles — logistic vehicles — and the compensation for individuals [involves] another 300,000,” Johan said.

Bursa Malaysia chairman Tan Sri Abdul Wahid Omar predicted that the removal of subsidy for diesel may cause inflation for 2024 to hit 2.5%.

On Monday, the government enforced the new retail price for diesel in Peninsular Malaysia at RM3.35 per litre (up RM1.20 from previously), while it kept the retail price of diesel for Sabah, Sarawak and Labuan at RM2.15 per litre.

Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, who spoke during the same session, predicted earlier that the removal of subsidy for diesel may cause inflation for 2024 to hit 2.5%.

“There may be that initial scepticism [about why the subsidy removal is necessary] but [the government] has time to demonstrate to the people that it is actually doing the right thing. So that's my encouragement to the government,” Wahid said.

Edited ByTan Choe Choe

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