KUALA LUMPUR, Oct 11 — Inflation is projected to expand two per cent in 2020 mainly due to the expected introduction of targeted fuel subsidy.
According to the Economic Outlook released by the Ministry of Finance today, the expansion was also expected to be partly attributed to dissipating base factors and the implementation of departure levy.
“The inflation outlook will also be subjected to foreign exchange rate movements and uncertainties in the global oil prices due to trade and geopolitical tensions,” said the report.
The report said the Consumer Price Index (CPI) increased marginally by 0.5 per cent between January and August this year.
“The low inflation rate was mainly attributed to the fixed RON95 and diesel prices since March 2019 at RM2.08 and RM2.18, respectively.
“As a result, the transport group contracted 3.6 per cent, dragging down the overall CPI,” it said.
Meanwhile, the CPI is estimated to grow 0.9 per cent this year partly attributed to the imposition of departure levy ranging from RM8 to RM150, commencing in September.
The introduction of the sugar tax in July is expected to have minimal impact on the overall inflation given its relatively smaller weightage in the CPI basket.
In addition, the Producer Price Index (PPI) is expected to be higher next year in tandem with a diminishing base effect and normalisation of production activities.
It fell by two per cent between January and August this year weighed down by a contraction in the agriculture, forestry and fishing (-10.3 per cent), mining (-3.8 per cent and manufacturing (-1.1 per cent) sectors.
This was due to weaker commodity prices, particularly crude oil and crude palm oil which led to lower production cost.