KUALA LUMPUR – The Malaysian Institute of Economic Research (MIER) has anticipated a “mild adjustment” in the RON95 subsidy and expects it to be carried out in July or October this year after the impact of the diesel subsidy rationalisation is assessed.
Executive director Dr Anthony Dass expects that the adjustment would not be as steep as the recent diesel subsidy, which saw a significant increase in the diesel price from RM2.15 to RM3.35 per litre.
“We need to look at the impact (of the diesel subsidy rationalisation). How is it… so probably we need to give a three to six-month grace period.
“We need to look at the impact analysis first, and how the people are adjusting. From that, the government can make the next adjustment to the RON95 (subsidy).
“I think it’s closer to October because it gives them ample space to look at the impact analysis,” he told reporters on the sidelines of the Malaysia Investment Development Authority (Mida)-Federation of Malaysian Manufacturers (FMM) investment seminar.
On the diesel contribution to the consumer price index (CPI) basket, Dass pointed out that a 1% increase in the diesel price is only causing about an impact of 0.2%. Hence, he said the impact is almost negligible. The RON95 contribution to the CPI basket is about 5.5%.
Earlier during his presentation titled “World Economy: Challenges and Opportunities”, Dass said most of the internal volatility in Malaysia has settled, which would support the economy’s growth going forward.
“The supply side is supporting the economy in terms reflected by the employment market, as well as the demand side, in terms of income. We are also expecting exports to pick up this year. Malaysia is very conservatively looking at 3.2 to 3.5% but we can go up to 5% this year.
“If you look at the monetary policy, we do not expect any change to the policy rate,” he said during his presentation, adding that MIER projected Malaysia’s gross domestic product to grow at 4.7% in 2024 and inflation rate at 3.0% in 2024.
For 2025, MIER expects Malaysia’s economy to grow at 4.8% and inflation at 2.9%.
Dass also forecast that the ringgit would close the year at RM4.65 against the US dollar and RM4.40 versus the greenback in 2025, primarily influenced by US interest rates. – June 13, 2024