Inflation rate expected to be at 2.1 pct in 2022

In the Economic Outlook 2022 report released today, the Ministry of Finance (MoF) said consumption demand for goods and services by households is expected to be supported by expectations of improved employment conditions.

"Furthermore, the projected growth in private investment activities and the implementation of the 12th Malaysia Plan (12MP) will further augment domestic demand," it said.

Besides, MoF said the Producer Price Index (PPI) is forecast to stabilise following the anticipated recovery of domestic and global economies.

It said the PPI by local production increased by 8.2 per cent during the first eight months of 2021 and is expected to remain stable throughout the year due to the normalisation of input costs.

"The growth is attributed to higher global commodity prices particularly crude oil and natural gas," said MoF.

By sector, the surge in PPI was particularly contributed by a significant increase in agriculture, forestry and fishing (36.6 per cent) followed by mining (30.2 per cent), manufacturing (4.3 per cent) and water supply (0.7 per cent).

In contrast, the index for the electricity and gas supply sector dropped by 0.7 per cent during the period.

Meanwhile, MoF said the Consumer Price Index (CPI) rose by 2.3 per cent during the first eight months of 2021, and the trend is expected to continue for the rest of the year.

"Similarly, the core index increased marginally by 0.7 per cent in the same period, indicating sustained domestic demand along with the gradual resumption of economic activities," it said.

The report revealed that the reversal from deflation in the previous year was due to higher pump prices of RON97, RON95 and diesel following escalating global crude oil prices, albeit lower electricity charges owing to the bill discounts given under the stimulus package.

Thus, MoF said inflation is expected to register at 2.4 per cent for the rest of 2021.