Johari: Inflation will ease when petrol prices drop

Finance Minister II Johari Abdul Ghani estimates Malaysia's inflation, which rose to an eight-year high in February, is likely to reduce due the decline in petrol prices.

Petrol price is the main contributor to the inflation this time around, as claimed by Bank Negara Malaysia, Johari told journalists when met at the Global Offset and Countertrade Association Asia Pacific Conference in Kuala Lumpur today.

Reuters had reported that the annual inflation grew 4.5 percent in February, the highest since November 2008, when it hit 5.7 percent.

"The main reason is the cost of the petrol. If you compare the February (2017 figure) with the same month last year, the (retail) price for RON95 was RM1.75 per litre then and RM2.30 per litre now," he said. 

"In the basket of Consumer Price Index (CPI), transportation costs represent almost 13 to 14 percent. If you take that out, the rest of the core inflation remains the same," Johari explained. 

Petrol prices and other commodities are beyond the control of the government, he said. 

"Now, with the the oil price coming down, I think you will see that figure (inflation rate) do some adjustment over time. That will ease inflation," he said. 

The retail price for RON 95 increased 20 sen from January to RM2.30 in February and has remained the same in March.

Without elaborating further, Johari, who is also an Umno supreme council member, said the government still needed to manage the inflation.

Last week, Bank Negara Malaysia governor Muhammad Ibrahim said the country's inflation would surge from two to three percent in 2016 to between three and four percent this year. 

In certain months, Muhammad said, the inflation rate may rise above four percent. 

It was reported that the inflation rate in Malaysia averaged 3.63 percent from 1973 until 2017, reaching an all time high of 23.9 percent in March 1974 and a record low of -2.4 percent in July 2009.

To a question, Johari said it would be too early to discuss the need to revive the RON 95 petrol subsidy, which was abolished in December 2014. - Mkini