RON95 targeted subsidy can influence Malaysia's inflation trends, says economist

KUALA LUMPUR - Malaysia’s inflation rate easing to 1.9 per cent in August 2024 has raised concerns about the implications of a RON95 targeted subsidy mechanism, according to Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.

He pointed out that RON95’s significant contribution of 5.0 per cent to the Consumer Price Index (CPI) positioned it as a key factor in determining future inflation trends.

While the lower inflation rate (in August 2024) was largely attributed to stable prices in the food and beverages (F&B) sector, Mohd Afzanizam cautioned that the planned removal of RON95 subsidies could exert upward pressure on prices if not handled carefully.

"Given the high consumption of RON95 among Malaysians, any subsidy adjustments must be calibrated with precision,” he told Bernama.

Afzanizam stressed the importance of implementing effective mitigation measures, such as direct cash transfers to eligible households, to ensure timely support for those affected.

"Clear communication regarding these measures is essential to alleviate public concerns about potential price hikes.

"Also, the government needs to ensure the price setting behaviour among businesses is scrutinised to avoid excessive price hikes that allow them to gain super normal profits,” he added.

Afzanizam said that as Malaysia prepares for these economic changes, the management of the RON95 subsidies will play a crucial role in maintaining stable inflation and ensuring consumer confidence in the market.

Yesterday, the Statistics Department (DoSM) said Malaysia’s inflation eased to 1.9 per cent in August 2024, driven by increased prices at restaurants and costlier utilities and food, despite the consumer price index (CPI) edging up to 133.2 against 130.7 recorded the same month in 2023. - BERNAMA