KUALA LUMPUR, Oct 18 — Headline inflation is expected to range between two per cent to 3.5 per cent in 2025, and remains manageable with the easing of global supply constraints and the moderation of global commodity prices.
“However, some upward inflation pressure could emerge from anticipated domestic policy measures,” said the Finance Ministry (MOF) in its Economic Outlook 2025 report released today.
This year, headline inflation is projected to remain manageable for the whole year and is expected to range between 1.5 per cent and 2.5 per cent, with inflation projected close to its long-term average of approximately 2.0 per cent.
“The risk of inflation would depend on the degree of knock-on effects on other items from any implementation of policy measures on subsidies and price controls, as well as fluctuations in global commodity prices,” it said.
Headline inflation, as measured by the Consumer Price Index (CPI), eased to an average of 1.8 per cent in the first eight months of the year (8M2024), down from 2.8 per cent in 8M2023, following a favourable cost environment and sustained demand.
The moderation in headline inflation was primarily driven by slower price increases in food and beverages (1.8 per cent), as well as restaurants and accommodation services (3.2 per cent), despite the increase in housing, water, electricity, gas, and other fuels (2.9 per cent), which was driven by upward adjustments in water tariffs and rising prices for sewage collection services.
Other main groups that recorded price increases surpassing the headline inflation were personal care, social protection and miscellaneous goods and services (2.9 per cent), and health (2.0 per cent).
The MOF said the targeted diesel subsidy, implemented in June this year, has a relatively manageable impact on inflation attributed to its small weightage in the CPI basket (0.2 per cent) as well as stricter enforcement actions against profiteering, continuation of diesel subsidies for selected business sectors, and targeted cash assistance.
Meanwhile, the Producer Price Index (PPI) is expected to moderate in 2025 following stable production activities.
In 8M2024, the PPI for local production rebounded 0.9 per cent from a contraction of 2.4 per cent in 8M2023.
All key sectors experienced increases, led by water supply (6.4 per cent), agriculture, forestry and fishing (3.8 per cent), and mining (3.3 per cent).
In addition, modest growth was recorded in the electricity and gas supply (0.5 per cent) and manufacturing (0.4 per cent) sectors.
The PPI for the stage of processing category recorded a turnaround of 3.4 per cent for crude material for further processing, while finished goods grew by 2.3 per cent.
Overall, the PPI is projected to remain stable throughout the year due to stability in commodity prices and sustained demand across key sectors.
— Bernama
