Malaysia: Inflation picks up in May, tax changes will dampen price pressures going forward

Consumer prices rose 0.17% month-on-month in May, up from April’s flat reading. The print reflected higher prices for food and non-alcoholic beverages and housing and energy.

Inflation increased from 1.4% in April to 1.8% in May, buoyed by higher fuel prices. Annual average inflation came in at 2.8%, down from April’s 3.0%, while core inflation—which excludes fresh food and administered prices of goods and services—was unchanged at 1.5%.

Malaysia Inflation Forecast

FocusEconomics Consensus Forecast panelists expect inflation to average 2.3% in 2018, which is down 0.4 percentage points from last month’s projection. This downward revision is likely linked to the new government’s decision to reduce the Goods and Services Tax (GST) to 0% effective 1 June, which will dampen price pressure in the near term. For 2019, the panel sees inflation averaging 2.5%.