Prices of goods expected to rise next year – Economist

SHAH ALAM - Prices of goods and services are expected to rise significantly next year, following the expansion of the Sales and Service Tax (SST) and the increase in the minimum wage to RM1,700, as announced in Budget 2025.

Malaysia University of Science and Technology (Must) economist Emeritus Professor Dr Barjoyai Bardai said traders were likely to seize the opportunity to raise prices, leveraging factors such as higher public sector wages and targeted subsidies for RON95 petrol.

He also cautioned that these changes would likely have a ripple effect across various business sectors.

“Traders usually look for opportunities to raise prices and they will have this chance because, starting from Dec 1, public sector salaries will increase before the minimum wage hike takes effect on Feb 1, 2025.

“Traders see that consumers will have greater purchasing power and they will raise prices with the justification that they need to pay higher wages, overhead costs and increased costs of imported premium goods and goods listed under the SST expansion,” he said.

He further explained that the multiplier effect of increased costs and taxes would be felt across all levels of business, from production to retail.

“When wholesalers take these goods at higher prices, they will pass them on to retailers at similarly higher prices before reaching food vendors. Food vendors, in turn, will increase prices at a much higher rate than the rise in costs,” Barjoyai added.

Ultimately, the economist warned that the rise in prices will be widespread, even though the current inflation rate was below two per cent.

He highlighted that food prices were already on the rise and would continue to increase.

Barjoyai also emphasised the need for the government to take proactive measures.

He suggested that the Domestic Trade and Cost of Living Ministry intensify monitoring efforts to ensure that traders do not raise prices excessively beyond what is reasonable.