IMF: Malaysia’s Inflation Could Reach Up To 8%

Emerging economies like Malaysia could see inflation skyrocket up to 8 per cent this year as the war in Ukraine is expected to keep energy costs up while a persistent global supply bottleneck hinders growth, according to an IMF forecast.

The Russian-Ukrainian conflict has put pressure on commodity prices, with oil and gas supplies tight after years of subdued investment and geopolitical uncertainty.

“This was a main inflation driver in Europe and, to a lesser extent, the United States,” the IMF said.

“Rising food prices also played a major role in most emerging markets and developing economies, as extreme weather reduced harvests and mounting oil and gas prices drove up fertiliser costs.”

Malaysia, a net food importer, is one of many countries hit by surging food prices, adding burden to consumers still reeling from the pandemic.

March’s Consumer Price Index (CPI) rose by 2.2 per cent to 125.6 against 122.9 in March 2021, Statistics Department data showed. The index surpassed the average inflation for the January 2011-March 2022 period of 1.9 per cent.

The IMF said inflation could hit 8.7 per cent in emerging economies and developing countries this year, the fastest clip since the global financial crisis in 2008, but expects the effect to be one-off.

Meanwhile advanced economies are expected to reach a 38-year high of 5.7 per cent.

The IMF said supply bottlenecks have also helped elevate inflation, as manufacturers and producers struggle to meet a rebound in global demand because of factory closure, port restrictions, shipping congestion, container shortages and worker absences.

Supply disruptions are felt most where recoveries were strongest, but it forecast demand to soften this year as governments roll back support and supply bottlenecks ease.

Still, it said China’s recurrent lockdowns, war in Ukraine, and sanctions on Russia will likely prolong disruptions in some sectors into next year.

Surging prices will have the greatest effects on vulnerable populations, particularly in low-income countries, the IMF warned.

“High overall inflation will also complicate the trade-offs for central banks between containing price pressures and safeguarding growth,” it said.

“While our baseline expectation is that inflation will eventually ease, inflation could turn out higher for several reasons. Worsening supply-demand imbalances, including from the war, and further commodity-price gains could keep the pace of inflation persistently high.”



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