Malaysian economy not in deflation - Bank Negara

Bank Negara governor Shamsiah Mohd Yunus has allayed concerns that the Malaysian economy is facing deflation.

At a press conference after the launch of the central bank’s 2018 Annual Report today, she stressed the country was not facing a widespread decline in the price of consumer items, which would be typical of a deflating economy.

“Due to the (headline) inflation rate being negative, there have been concerns that we are facing the threat of deflation. Let me be very clear, this is not the case.

“Deflation occurs when the declines are broad-based. We do not observe a widespread price decline,” she said at the central bank’s headquarters in Kuala Lumpur.

The recent reported negative headline inflation figures in the first two months of the year were caused by lower fuel prices, Shamsiah (below) explained.

Headline inflation accounts for the price of consumer goods, which can be volatile. In contrast, core inflation in calculated discounting the price of such goods.

“The recent negative inflation was mostly accounted for by domestic fuel prices. This is different from (if there was) a severe drop in spending (where) firms had to cut prices to help consumers,” she explained.

Moving forward, Bank Negara expects headline inflation to stabilise and average out at between 0.7 and 1.7 percent.

Core inflation, which has been averaging 1.5 and 1.6 percent since December 2018, is also expected to remain stable.

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