CGS-CIMB keeps 2023 inflation forecast at 3.0 pct y-o-y

30 Dec 2022 11:11am
Image for illustrative purposes only - FILE PIX
Image for illustrative purposes only - FILE PIX
KUALA LUMPUR - CGS-CIMB Securities Sdn Bhd (CGS-CIMB) forecasts Malaysia’s inflation for 2023 to be at three per cent year-on-year (y-o-y), compared to the 2022 forecast (2022F) consumer price index (CPI) inflation of 3.3 per cent y-o-y.

Head of economics, Nazmi Idrus said the government’s intervention on matters such as chicken prices and petrol and toll fees would continue to partly contain inflation in the near term.

"However, the recent electricity price hike for non-domestic and non-small and medium enterprises (SMEs) (low voltage) users will take effect on January 2023, and we expect this to lead to some increase in headline inflation.

"Our calculation highlights a possibility of the CPI rising by 10 basis points y-o-y in January 2023F, as roughly 60 per cent of electricity users in the country are non-domestic users, and of these, 60 per cent are non-SMEs,” he said in a note today.

Electricity weighs in on the CPI basket at 2.7 per cent, he said, but the second-round effect could be slightly larger.

Meanwhile, Nazmi said November 2020’s strong core inflation growth reflected the strong domestic demand conditions during the month, supportive of the continued rate normalisation cycle by Bank Negara Malaysia (BNM).

BNM’s statement in November provided a clear warning that inflationary pressures are likely to remain in 2023, and the central bank highlighted its readiness to remain hawkish if necessary.

"We expect two more 25 basis point increases to the overnight policy rate (OPR) to 3.25 per cent in 2023F,” said Nazmi.

In November, Malaysia’s CPI rose 0.3 per cent month-on-month (m-o-m) (Oct 22: +0.2 per cent m-o-m) and 4.0 per cent y-o-y (similar to October 2022).
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Meanwhile, core CPI grew 0.4 per cent m-o-m (October 22: +0.1 per cent m-o-m), raising y-o-y growth to 4.2 per cent (October 2022: +4.1 per cent), driven by two components, namely food and hotels and restaurants. - BERNAMA