The Edge Malaysia’s Post

RON95 TARGETED SUBSIDY CAN INFLUENCE MALAYSIA'S INFLATION TRENDS, SAYS ECONOMIST. KUALA LUMPUR, Sept 24 (Bernama) -- Malaysia’s inflation rate easing to 1.9 per cent in August 2024 has raised concerns about the implications of a RON95 targeted subsidy mechanism, according to Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid. He pointed out that RON95’s significant contribution of 5.0 per cent to the Consumer Price Index (CPI) positioned it as a key factor in determining future inflation trends. While the lower inflation rate (in August 2024) was largely attributed to stable prices in the food and beverages (F&B) sector, Mohd Afzanizam cautioned that the planned removal of RON95 subsidies could exert upward pressure on prices if not handled carefully. “Given the high consumption of RON95 among Malaysians, any subsidy adjustments must be calibrated with precision,” he told Bernama. Mohd Afzanizam stressed the importance of implementing effective mitigation measures, such as direct cash transfers to eligible households, to ensure timely support for those affected. “Clear communication regarding these measures is essential to alleviate public concerns about potential price hikes. “Also, the government needs to ensure the price setting behaviour among businesses is scrutinised to avoid excessive price hikes that allow them to gain super normal profits,” he added. Mohd Afzanizam said that as Malaysia prepares for these economic changes, the management of the RON95 subsidies will play a crucial role in maintaining stable inflation and ensuring consumer confidence in the market. Yesterday, the Department of Statistics Malaysia (DoSM) said Malaysia’s inflation eased to 1.9 per cent in August 2024, driven by increased prices at restaurants and costlier utilities and food, despite the consumer price index (CPI) edging up to 133.2 against 130.7 recorded the same month in 2023. #affinmoneybrokers

News Highlights - October 14, 2024 Govt may collect Rs300bn from agri tax https://lnkd.in/dpGgyhMf Pakistan lags behind regional peers in living standards: IMF https://lnkd.in/dKuicuar Li likely to inaugurate Gwadar airport https://lnkd.in/dXq7XJZc Exporters now to pay regular income tax: IMF https://lnkd.in/d2e6JxxM Forex reserves will touch $11bn in two weeks: Aurangzeb https://lnkd.in/dFUqpTiw SBP launches ‘Challenge Fund’ https://lnkd.in/dTEk_ipJ Pakistan needs to repay external debt of $18.8bn in current fiscal: IMF https://lnkd.in/dg8nt2za Ogra notifies up to 7.11pc reduction in RLNG prices https://lnkd.in/dTSF3yPQ Govt commits to IMF : Policy rate to go up if inflation rises https://lnkd.in/db7nngx6 Govt pledges PSDP cuts, other reforms amid IMF criticism https://lnkd.in/dzgAB9X7 Substantial increase in fuel prices likely https://lnkd.in/dP-_9rYW IMF assured of semi-annual gas tariff adjustment by Feb 15, 2025 https://lnkd.in/dUuT62Du 7 PMs, India’s EAM, Iran’s VP to attend moot https://lnkd.in/dmNdiuNJ Futures spread down 38bps https://lnkd.in/dAEvpHVk Economic Coordination Committee green-lights more sugar exports https://lnkd.in/dUFAkASr Mills to start crushing from Nov 21 https://lnkd.in/dPuhNXPg Digital payments share increases to 84pc in FY24 https://lnkd.in/d24r-3B9 5G spectrum auction: NERA selected for consultancy services https://lnkd.in/dXrnpDM8 Two Discos’ sell-off to wrap up by Jan-end https://lnkd.in/dukyd2K2 IMF raises alarm over banks’ heavy reliance on govt https://lnkd.in/dgycJi5S Govt stops payments to 18 IPPs ahead of negotiations? https://lnkd.in/dANCuprz

Inflation Unlikely To Spike Despite Subsidy Rationalisation --AmBank Research. 2024-05-23 06:52:42.213 GMT By SITI NOOR AFERA ABU KUALA LUMPUR, May 23 (Bernama) -- Malaysia’s inflation is not expected to spike despite the subsidy rationalisation rollout, according to AmBank Research. However, it said Malaysia’s average inflation in 2024 will likely be higher than in 2023. Based on recent government announcements, the research house believes the government is committed to pursuing fiscal consolidation, “allowing prices to gravitate and adjust closer to market equilibrium.” "The strategic imperative here is to pace and sequence the rollout of subsidy rationalisation. "The complementary policy to subsidy rationalisation, whether an early improvement in wage growth or an expansion in social safety nets by shifting the subsidy burden from fuel to other types of subsidies, should also be considered and rolled out concurrently," the research house said in a note. AmBank Research said mild inflation is possible if food and beverages inflation, accounting for 29.8 per cent of the consumer price index weightage, remains low and stable. It is also possible if there is no sudden removal of fuel subsidies, or in other words, a progressive and gradual removal of fuel subsidies. Another factor for milder inflation is if there is a smaller second-round effect amid a more favourable exchange rate environment due to the possible narrowing interest rate/yield differentials between Malaysia and the United States. The research house thinks the government is aware of the immense pressure to swiftly implement necessary reforms, which overwhelm the economy with multiple disruptive policies within a short time frame. “The phased approach is a measured policy choice to balance the urgency and sustainability of initiating reforms and mitigate immediate inflationary pressures while providing ample breathing room for the economy to readjust to new economic realities,” it said. “As such, the risk of such policy choice is that the full impact of subsidy rationalisation will be felt later rather than earlier. This ensures reform measures consider the well-being of the economy and the people, which is the essence of Prime Minister Datuk Seri Anwar Ibrahim’s speech two days ago.” Anwar recently announced the implementation of the diesel subsidy rationalisation programme, involving consumers in Peninsular Malaysia, which is expected to result in a savings of RM4 billion a year for the government. #affinmoneybrokers

*BRS News Flash 21.08.2024:* • The Colombo Bourse ended in red as ASPI lost 9.46 points to close at 11,494.61 (-0.08%) while S&P SL20 moved down 0.69 points to close at 3,300.16 (-0.02%). 📉📊 *Source:* https://lnkd.in/gJsUUYxq • Sri Lanka crossed the 1.3 million tourist arrivals mark for the year, with over 117,000 visitors registered in the first 19 days of August. ✈️🌴 *Source:* https://lnkd.in/gE-d3GyK • Sri Lanka has already submitted compensating revenue measures to the International Monetary Fund (IMF) for the proposed adjustment on personal income tax (PIT) to provide relief to taxpayers in the middle bands, Treasury Secretary Mahinda Siriwardena said. 🏦💰 *Source:* https://lnkd.in/g949uQt2 • Sri Lanka’s tea exports in July 2024 reached 21.35 million kilograms, marking a decline of 1.42 million kilograms compared to the same month in 2023, according to data from Sri Lanka Customs. ☕🍃 *Source:* https://lnkd.in/g2nqEkJH • The MoU was signed by LTL Holdings CEO Nuhuman Marikkar and Petronet LNG CEO and Managing Director Akshay Kumar Singh, with Power and Energy Minister Kanchana Wijesekera highlighting the initiative as a crucial component of President Ranil Wickremesinghe’s broader energy strategy. 💡💼 *Source:* https://lnkd.in/gexPZm8S *BRS Equity Research*

I sometimes question the intentions and competence of those managing our economy, as I often struggle to understand the flimsy reasons they provide for some of their poor decisions. The removal of subsidies and the floating of the exchange rate, justified by claims of curbing illegal benefits, fail to consider the broader implications on the economy and the cost of living for the average citizen. The elimination of subsidies on both petrol and electricity has led to the closure of many small and medium-sized businesses, with others struggling to cope. This has resulted in significant job losses. Furthermore, it seems implausible to claim that the government has not reverted to a subsidy regime. Despite the removal of the subsidy, we still import petrol, and since the exchange rate has increased from around 600-700 to over 1450-1500 naira per dollar, it is inconceivable that the price of petrol has not risen unless the government is covering some costs. The recent removal of the energy subsidy is economically nonsensical due to its multiplier effects on the economy. It significantly impacts small-scale businesses, which are the largest employers of labor, increases inflation, heightens hardship, reduces profits, and decreases government revenue from various taxes. Additionally, the floating of the naira is another poorly conceived policy. This approach inevitably leads to the kind of instability we are currently experiencing. Floating the currency would have been a prudent move if we had substantial exports to generate foreign exchange to meet or exceed demand. As we celebrate Democracy Day today, I urge our policymakers to thoroughly assess the full implications of their policies before implementation. Happy Democracy Day to all Nigerians.....Naija Si madun

In my latest column offering, I take a stab at how the Malaysian government has a habit of making big announcements that end up short on key details on implementation. It's not enough to just say why something needs to be done. People need to know who exactly will be affected and how it will be carried out. And maybe start talking to people first before deciding on something so big like the petrol subsidy cuts. https://lnkd.in/gEpK2Efr

[MALAYSIA] Malaysia's Finance Minister Tengku Zafrul Aziz has projected that the country's inflation will likely settle at the lower end of the government's target range of 2% to 3% by 2025. #MalaysiaInflation #EconomicRecovery #FinanceMinister #TengkuZafrulAziz #InflationTarget #EconomicStability #CommodityPrices #MonetaryPolicy https://lnkd.in/gYNjccyb

🇲🇾Malaysia Budget 2025 - Maybank Investment Bank’s research views the Budget as striking a balance between fiscal consolidation, “raising the ceiling” to boost economic growth, and “raising the floor” by lifting standard of living, while providing no big negative surprises for equities. ⛽️Among many measures that could have widespread implications is the government’s targeted #RON95 petrol subsidy programme to be launched in mid-2025, aiming at foreigners and the top 15% (T15) of the wealthiest Malaysians who consume a sizeable chunk at 40% of subsidised petrol (RM8 bil). ⛽️For the other 85% of the population, the government will continue to subsidise and spend RM12 bil on petrol subsidies. The questions are: ✅ What is the quantum of increase in the retail price of RON95 petrol for foreigners and T15? ✅ How will the government maintain RON95 subsidies for the other 85% of Malaysians? ✅ How much would this weigh on consumer sentiment and spending? Based on past experience, RON95 price hikes, which were broad-based, always had a substantial negative impact on consumer sentiment whenever it was increased markedly (see chart). The extend of impact this upcoming round will depend on the implementation mechanism to exclude the 85%. For more analysis and the beneficiaries, download our report “Malaysia Budget 2025 – Fortifying the MADANI Economy” from Maybank Trade MY app. #MIBGresearch #MalaysiaBudget2025 #MaybankGlobalBanking

Turkiye's 🇹🇷 Finance Minister Şimşek: 📌 #Turkiye is the only country whose credit rating has been increased by 3 credit agencies (Fitch, S&P and Moody's) in 2024, and the outlook is positive 📈. 📌 Our biggest priority is to reduce #inflation and save low-income groups, minimum wage earners, retirees, civil servants & all segments of society from the inflation problem.

The visiting IMF team has informed Pakistan's authorities that the next bailout package under the Extended Fund Facility (EFF) will be considered only after the upcoming budget is aligned with IMF directives and approved by parliament. This agreement could lead to formal negotiations and a staff-level agreement by July 2024, potentially augmented by $6-8 billion in climate finance. The government must demonstrate its capacity to raise FBR revenue, generate a primary surplus through expenditure cuts, and implement structural reforms to minimize SOE losses. Key requirements include hiking electricity and gas tariffs in July and August 2024. During ongoing talks in Islamabad, the IMF gathered data on major economic fronts and outlined expectations for the 2024-25 budget. The government will need to increase the tax-to-GDP ratio, which may fall to 9% this fiscal year, and collect over Rs12 trillion in the next budget, up from an anticipated Rs9 trillion. Non-tax revenue targets will also rise, with a carbon levy under consideration. On the expenditure side, SOEs, pensions, and subsidies must be rationalized, and federal development projects with provincial scopes will be abandoned. The IMF demands higher power tariffs via baseline, fuel price adjustments, and quarterly tariff adjustments, alongside increased gas tariffs. Additionally, solar net metering will be independently reviewed due to its impact on DISCOs' grids and the power sector's fiscal challenges. A top official expressed concerns over front-loading the next IMF package, citing the need to protect the social fabric amid persistent high inflation. #pakistaneconomy #imf #bailout #eff #budget2024