Easing Fuel Prices Drag Inflation Lower

Economic Research	22 June 2017
Malaysia
Economic Update
Easing Fuel Prices Drag Inflation Lower The headline inflation rate slowed to 3.9% YoY in May 2017, from 4.4% in April and 5.1% in March. This was mainly on account of a slowdown in the cost of transportation amid lower fuel prices and a fading low base effect during the month. Looking ahead, we envisage the headline inflation rate to normalise to 2.8% YoY in 2H17 (+4.3% estimated for 1H17) amid lower fuel prices and a waning low base effect. For the full year, we expect headline inflation to pick up to 3.5% in 2017, from +2.1% in 2016. This is on account of:     i.   Generally higher fuel prices YoY;    ii.   Removal of subsidies on the prices of selected administered goods;   iii.   Higher business costs;   iv.   Weak MYR translating into higher import prices. Economist:  Vincent Loo Yeong Hong  | +603 9280 2172 Economist:  Aris Nazman Maslan  | +603 9280 2184