Russia-Ukraine conflict: Govt focuses on mitigating spillover effect on nation's economy

KUALA LUMPUR: The nation's economy has experienced spillover effects from the ongoing Russia-Ukraine conflict prompting the government to focus on its trajectory in mitigating the outcome to Malaysians due to the increase of global commodity and food prices while ensuring sustainable and balance growth.

According to the Economic Outlook 2023 report released by the Finance Ministry today the conflict has made it more difficult to support economic growth while controlling price increment.

Recently the hike in poultry prices was due to the increase in the price of chicken feed which was caused by the increase in the price of the main ingredients used to produce chicken feed, which is corn, soybeans and palm oil since the war broke out between Russia and Ukraine. These two countries are among the main producers and exporters of corn and wheat,

The increase in the average price of chicken affects the inflation rate of the entire household where the price of standard processed chicken was RM8.55 per kilogramme (kg) in June 2021 compared to RM10.02 per kg in June 2022 and the price of a chicken egg for all grades fluctuated between RM0.40 to RM0.45.

In June 2022, the weightage of meat (including chicken) was 2.5 per cent of the weightage of overall food items in the Consumer Price Index (CPI) basket, where the CPI was at a high rate of 8.7 per cent.

"Meanwhile, the weightage for milk, cheese and eggs (including chicken eggs) was 0.5 per cent of the entire CPI basket where the CPI was at a rate of 6.7 per cent," read the report.

Hence, as a measure to curb inflation, the Government had set the new ceiling retail price for standard process chicken at RM9.40 per kg, while the new ceiling price for chicken eggs was set at RM0.45 (grade A), RM0.43 (grade B) and RM0.41 (grade C) effective July 1 2022.

Furthermore, the government has also maintained the subsidised fuel price at RM2.05 per litre for RON95 and RM2.15 per litre for diesel.

"As one of the world's largest energy exporters, the disruption of Russian oil and gas supply has hampered global supply, resulting in a surge in global crude oil and coal prices.

"The increase in the price of Brent crude oil from USD91.31 per barrel in early February to USD107.97 per barrel at the end of July 2022 had directly impacted retail fuel prices in Malaysia. The price of RON97 petrol has increased from RM3.12 per litre in early February to RM4.30 per litre at the end of August 2022," the report noted.

The report added, the increase in price of goods and services in Malaysia had reduced Malaysians' purchasing power exponentially with the average inflation rate of two per cent from 2021 until July 2022.

"The CPI for the period of January to July 2022 increased 2.8 per cent as compared to the same period in the previous year.

The main impetus of the increase in the inflation rate is under the category of food and non-alcoholic beverages which recorded an increase of 4.8 per cent, including the price of meat (9.1 per cent); milk, cheese and eggs (7 per cent); and vegetables (6 per cent).

Among measures taken by the government was to provide electricity rate rebates to domestic consumers and establishing the Task Force on Jihad against Inflation to control the increase in the price of goods more efficiently and effectively.

"In addition, Bank Negara Malaysia's Monetary Policy Committee has increased the Overnight Policy Ratio (OPR) by 25 basis points in May 2022 from a record low of 1.75 per cent, and another 25 basis points in July and September 2022 which makes the OPR 2.5 per cent, to curb inflationary pressure caused by the depreciation of the ringgit," read the report.

-- BERNAMA