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KUALA LUMPUR: The Covid-19 pandemic caused Malaysia’s consumer price index (CPI) to drop 1.2 percent in 2020, a drop that had never been seen in decades, MIDF Research said.
The research house said the last time Malaysia had a CPI deflation was in 1965 with a tepid fall of -0.1 percent year-on-year.
“The deflation of 2020 was the result of Covid-19, which suppressed demand combined with sluggish global oil prices.
“Food and non-alcoholic beverages managed to grow 1.3% year-on-year (2019: 1.7%), while prices of non-food products decreased 2.3% year-on-year (2019: 0.2%)” . he said in a note on Friday.
MIDF Research said the continuing decline in the Producer Price Index (PPI), a leading indicator of CPI inflation, suggests that producer cost inflationary pressure on consumer prices will remain subdued at least until early 2021 .
The PPI decreased 3.0% year-on-year in November 2020, marking the ninth consecutive month of deflation.
“We revised the CPI inflation forecast down to 1.8% in 2021.
“With the latest announcement on electricity rebates and new vehicle sales tax exemption to continue through the first half of 2021, the increase in the CPI could moderate from our initial estimate of 2.2% year-on-year,” he said. .
Meanwhile, with almost the entire country under the Movement Control Order (MCO) due to an increase in Covid-19 cases, it reduced people’s outdoor activities and ultimately affected consumption.
“Overall, however, prices for most products will improve compared to last year’s 1.2% drop thanks to the return in demand as the economy recovers, facilitated by the low rate environment. of interest and the distribution of vaccines.
“World oil prices are also expected to rise a bit more this year to an average of $ 51 per barrel of Brent,” he said. –Called
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