Low inflation, old policies and the Najib–Anwar cost-of-living comparison

SHAH ALAM - As Malaysia looks ahead to 2026, inflation is expected to remain low and manageable - but public debate over the cost of living is unlikely to ease, with comparisons between Prime Minister Datuk Seri Anwar Ibrahim administration and the former prime minister Datuk Seri Najib Razak era continuing to shape perception as much as economic data.

Economists broadly expect headline inflation to stay within the 1.5 to 3.0 per cent range next year, assuming no major external shocks. Bank Negara Malaysia and private sector forecasts point to growth of around 4 to 5 per cent, with price pressures contained by weak global demand, competitive domestic markets and cautious consumer spending.

Yet despite these relatively stable projections, research firm O2 Research chief researcher Anis Anwar Suhaimi said the public mood remains fragile, driven less by inflation rates than by comparisons with earlier policy periods, particularly under Najib, when fuel subsidies, cash transfers and consumer-facing programmes were first introduced.

“Many of today’s programmes are perceived as rebranded versions of earlier ideas. They are seen as part of the same policy family, not a fundamentally new doctrine,” Anis said, referring to initiatives such as Sumbangan Tunai Rahmah (STR), Sumbangan Asas Rahmah (SARA), targeted fuel subsidies and discount schemes.

That perception, he said, has created a sense that Najib’s economic model remains the “authentic reference point”, while the current administration is viewed as managing continuity rather than projecting a distinct economic identity of its own.

“This is where the ‘copy and rebrand’ sentiment comes from,” Anis said.

However, economists stress that the comparison, while understandable, often ignores the vastly different global environments in which the two leaders governed. Najib’s tenure coincided with a commodities boom and strong pre-pandemic global growth, while Anwar is operating in a post-pandemic world marked by high public debt, slower growth and geopolitical uncertainty.

From a policy standpoint, Anis noted that the current government’s shift toward targeted subsidies, fiscal consolidation and digital targeting systems reflects genuine economic constraints rather than cosmetic rebranding.

“Policy instruments may overlap, but the fiscal room and global conditions are very different,” he said.

Looking ahead to 2026, economists expect inflation pressures to remain moderate, though not without risks. Anis said potential upward pressures could come from further subsidy rationalisation, particularly if RON95 fuel pricing is adjusted, as well as from global food price volatility linked to climate events and geopolitical tensions.

Photo for illustrative purposes only. - Photo: CANVA

Still, he does not foresee an inflation spike.

“What is more uncertain is whether perceived affordability improves,” he said, noting that without stronger wage growth and better job quality, households may continue to feel squeezed even in a low-inflation environment.

UniKL Business School economist Associate Professor Dr Aimi Zulhazmi Abdul Rashid said it is misleading to frame the cost-of-living debate purely as a Najib-versus-Anwar comparison.

Malaysia imports nearly RM70 billion in food annually, exposing domestic prices to imported inflation and exchange rate movements, he said. Post-pandemic supply chain restructuring has also reshaped pricing dynamics globally.

“These are two very different periods, pre-pandemic and post-pandemic,” he said, adding that Malaysia’s inflation easing to around 1.3 per cent in 2025 exceeded earlier projections, even after targeted fuel subsidies were introduced.

Aimi expects inflation in 2026 to average 1.5 to 2.0 per cent, with a temporary uptick in the first quarter due to Chinese New Year and Hari Raya demand, before stabilising later in the year.

Economist Dr Geoffrey Williams said while headline inflation has been low, core inflation remains above historical averages, reflecting underlying price pressures. He noted that essentials continue to rise, even as prices in areas such as mobile and internet services fall.

“The problem is stagnant incomes. Prices are rising more slowly, but wages have not improved enough to make things feel affordable,” he said.

He added that subsidy rationalisation measures, including BUDI95 and income supplements such as MySARA, have helped cushion lower-income households, though Budget 2026 did not expand STR-SARA payments, limiting short-term relief.

Bank Muamalat Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said inflation has remained manageable despite multiple tax and subsidy reforms introduced over the past three years, including the service tax hike, digital services tax and diesel subsidy rationalisation.

However, he cautioned that core inflation rose to 2.2 per cent by October 2025, indicating that underlying cost pressures have not disappeared.

As 2026 approaches, economists agree that the real political test for the government is not whether inflation stays low, but whether households feel any tangible improvement in purchasing power.

Macro numbers say ‘stable, but unless incomes, job quality and housing affordability improve, the public debate will continue to be framed through nostalgia, not statistics.