The existing RM2.05 and RM2.15 per litre subsidy ceilings for RON95 and diesel, respectively, may be subject to revision and a possible progressive rise later this year.
If there is no gasoline subsidy, as opposed to the present RM2.05 per litre, the actual price of RON95 is anticipated to reach roughly RM3.22 per litre, according to PublicInvest Research analyst Sabrina Edora.
Furthermore, it is estimated that eliminating fuel subsidies for the T20 income category would raise inflation by 0.45 to 0.75 percentage points each year. The government recently indicated that the Pangkalan Data Utama (PADU) system, which will be used to deliver targeted subsidies for RON 95 fuel and diesel next year, will be ready by the end of this year.
Datuk Seri Salahuddin Ayub, Minister of Domestic Trade and Cost of Living, stated that the integrated database will review all existing data to enable tailored subsidies to be supplied to the appropriate target.
In April 2023, the Consumer Price Index (CPI) increased at a slower rate of 3.3 percent, compared to 3.4 percent in March 2023, in accordance with market expectations. In the meantime, core inflation rose at a slower rate of 3.6 percent in April, compared to 3.8 percent in March.
Overall inflation in the country is expected to average between 3.0 percent and 3.5 percent in 2023, according to PublicInvest Research, with the caveat that any changes to the retail oil price cap or the deployment of price control measures may impact the prediction. Bank Negara Malaysia (BNM) expects inflation this year to be between 2.8 percent and 3.8 percent.
Meanwhile, Sabrina anticipates the BNM will maintain its current monetary policy stance until at least the third quarter of 2023. She said, with the Overnight Policy Rate (OPR) returning to pre-pandemic levels, he expects BNM to use a wait-and-see approach, especially in relation to monitoring important central bank developments. Any change to the current monetary policy stance will be subject to careful evaluation based on further progress in macroeconomic conditions.