KUALA LUMPUR, Aug 22 — RHB Investment Bank Bhd (RHB IB) has revised its 2025 Malaysian inflation forecast down to 1.6 per cent, from 2.0 per cent previously.
It made the revision after considering the upcoming reduction in RON95 retail prices and the limited inflationary impact from the expansion of the Sales and Service Tax (SST).
RHB IB also considered factors like the minimal upward pressure from electricity tariff restructuring and subdued demand and cost pressures in the second half of 2025 (2H 2025).
“Inflation is expected to stay manageable this year, given the lack of excessive demand pressures and a potential economic slowdown in the second half (2H 2025). Cautious sentiment might weigh on business activity and private consumption, keeping price pressures in check,” it said in a research note today.
Inflation averaged a soft 1.4 per cent in the first half of 2025 (1H 2025) and is projected to remain manageable at an average of 1.8 per cent in the second half of 2025 (2H 2025).
“Domestic policy developments point to a continued benign inflation trajectory in 2H 2025, below our initial estimate of 2.4 per cent, while the latest official headline inflation forecast range has been revised to 1.5-2.3 per cent (versus 2-3.5 per cent previously) for 2025 amid moderate demand and cost conditions,” RHB IB noted.
It reckons that the direct impact of the SST expansion on the Consumer Price Index (CPI) is estimated to be negligible at around 0.1-0.2 per cent year-on-year (y-o-y) on a full-year basis.
“We may expect some passthrough impact from SST broadening to higher food prices and increased business costs to consumers, albeit in a limited fashion,” RHB IB said.
It added that the retail price of RON95 petrol would be lowered to RM1.99 per litre for eligible motorists (estimated to benefit 18 million motorists), from RM2.05 per litre currently, under the government’s plan to retarget subsidies on petrol.
“Based on our preliminary analysis, a three per cent reduction to RM1.99 per litre may lower annual inflation by 0.1-0.2 per cent. Assuming implementation in October 2025, the impact is merely 0.03-0.04 per cent,” RHB IB said.
The Finance Ministry is expected to announce detailed plans for the targeted RON95 fuel subsidy by the end of September, following Prime Minister Datuk Seri Anwar Ibrahim’s statement on the matter on July 23.
