Malaysia’s Inflation Among Region’s Lowest, But Upstream Cost Pressures Rising -- World Bank

KUALA LUMPUR, Oct 6 (Bernama) -- Malaysia’s inflation is among the lowest in the region, but rising upstream cost pressures could pose an inflation risk later this year, said the World Bank lead economist Apurva Sanghi.

He said producer price inflation had swung from negative territory in December 2023 and February 2024 to over 10 per cent in June and almost 11 per cent in August this year.

This had renewed upstream cost pressures, presenting a potential inflation risk later in the year, he told the media during a briefing on the October 2026 East Asia and Pacific Economic Update here today.

Nevertheless, the World Bank projected headline inflation to rise modestly to two per cent this year, with subsidies limiting the pass-through of inflation to households despite higher energy prices.

Apurva said Malaysia recorded a relatively low inflation rate of 1.9 per cent in August 2026, compared with its regional peers Thailand (2.5 per cent), Indonesia (3.2 per cent), Vietnam (4.9 per cent) and the Philippines (6.1 per cent).

He said lower-income households, defined as those earning less than RM3,000 a month, faced milder price pressures.

Inflation for these households averaged only 1.2 per cent in the first half of this year and remained below headline inflation every month during the period, he said.

He said income growth and transfers had also outpaced living costs to a greater extent for lower-income households than for higher-income households.

On economic growth, Apurva said Malaysia had exceeded expectations, with external demand playing a starring role while domestic demand played a supporting role.

Private consumption growth rose to 4.8 per cent in the second quarter (2Q) from 4.7 per cent in the 1Q, while private investment growth slowed to 4.3 per cent from 7.8 per cent, he said.

He said private investment as a share of gross domestic product remained below its pre-pandemic level, standing at 15.8 per cent last year compared with 16.9 per cent during the 2015-2019 period.

Taking a broader perspective, Apurva said consumer sentiment, business confidence and private investment were not clearly trending upwards.

Consumer sentiment was at its lowest since 2022, based on industry research, while business confidence was as low as during the pandemic, he added.

-- BERNAMA