Malaysia's inflation expected to rise slightly, remains under control with new diesel subsidy strategy - Economist
Despite subsidy changes, no significant price hikes expected in Malaysia’s transport and goods sectors
SHAH ALAM - Malaysia is expected to see a slight rise in inflation, but it will remain below the typical three per cent rate following the implementation of targeted diesel subsidies, according to Universiti Putra Malaysia (UPM) economist Associate Professor Dr Ahmed Razman Abdul Latiff.
Currently, Malaysia's inflation rate stands at 1.8 per cent and Razman predicted a potential increase to two per cent, which he considered manageable.
He stressed that the diesel subsidy targeting is designed to be minimally impactful, as it continues to cover key sectors, including ten types of public transport and 23 types of goods transport under the Subsidised Diesel Control System (SKDS).
"From the consumer's perspective, the fear of increased prices for goods and services might be unwarranted, as sectors using diesel for operations have not seen price hikes due to exemptions in the subsidy targeting," he told Sinar recently.
He also reassured that while a price increase cannot be entirely ruled out, the current low inflation rate provides a buffer against significant impacts.
In a related matter, Razman also discussed the potential of using blockchain technology to address fuel smuggling and subsidy leakage, citing its successful application in ports in Singapore and Hong Kong to track goods movements.
"Integrating blockchain could revolutionise how we manage diesel distribution and could be a definitive solution to the smuggling problem," he added.
Meanwhile, UniKL Business School economics and finance expert Associate Professor Dr Aimi Zulhazmi Abdul Rashid concurred with the inflation expectations and highlighted the potential multiplier effect on the economy due to increased transport and logistics costs.
He also acknowledged the government's efforts through the SKDS to mitigate price hikes on goods.
Aimi also pointed out that while the subsidy restructuring aims to rationalise government spending and channel savings towards the needy, it won't immediately reduce the national debt, which stands at RM1.2 trillion.
However, he expressed optimism that successful implementation could lead to broader applications, including potential savings in government expenditure and national debt reduction.
"The restructuring could eventually extend to other fuels and essential goods currently under bulk subsidy schemes, aligning national spending more sustainably," he added.