KUALA LUMPUR, Nov 27 — Malaysia’s inflation is expected to fall within a range of 2.5 per cent to 3.5 per cent in 2024, mainly due to the effects of subsidy rationalisation and the impact of the services tax increase, said AmBank Group.

However, the risk on the inflation outlook tilts to the upside if the scope of the rationalisation extends to RON95 fuel, it said in a research note today.

"As guided, the implementation depends on the progress of the National Utility database (Padu), and the database is likely to be completed in the first quarter of 2024,” said AmBank.

It said that the government forecast inflation to be between 2.1 per cent and 3.6 per cent in 2024, reflecting the gradual shift towards a targeted subsidy mechanism, which is expected to be realised in 2024.

For 2023, AmBank Group expects inflation to be in a range of 2.5 per cent to 3.0 per cent.

Meanwhile, Malaysia’s economic growth is anticipated to remain at 4.0 per cent for 2023 and is expected to pick up to 4.5 per cent in 2024.

"The weak export sector is anticipated to recover in 2024 due to easing inflationary pressures in major economies.

"On the domestic front, measures announced in Budget 2024, particularly those aimed at boosting consumption, are anticipated to support economic growth,” it said.

However, the bank said the impending subsidy rationalisation, which includes food and fuel later in 2024, may lead to changes in consumer spending priorities.

Meanwhile, Maybank Investment Bank (Maybank IB) has maintained its 2024 inflation forecast at 3.0 per cent, pending more information and details on Budget 2024 measures, especially on subsidy rationalisation.

It also reiterated the 2023 headline inflation rate forecast at 2.6 per cent, given the ten months of 2023 headline inflation rate at 2.7 per cent year-on-year. — Bernama