Country Report Malaysia March 2011

Outlook for 2011-15: Inflation

Owing to higher global prices for crude oil and non-oil commodities, consumer price inflation will accelerate to an average rate of 3.1% in 2011, and price rises will then average 3.6% a year in 2012-15. Government efforts to rationalise the extensive subsidy scheme will exert upward pressure on prices in the forecast period. Another source of inflationary risk will be the new GST, which the government will attempt to introduce early in the period. Disinflationary influences will also be strong, however. The removal of trade barriers and greater regional economic integration will help to maintain a low-inflation environment. As a country that is heavily dependent on international trade, Malaysia will not be able to escape the effects of growing competition and import penetration in its domestic market, especially in the form of a wide range of consumer goods from China. Another factor that will help to keep inflation in check will be the forecast appreciation of the ringgit against the US dollar in 2011-15. Since most imports and exports are denominated in US dollars, imports will consequently become cheaper.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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