Malaysia's Inflation Outlook May Rise as Firms Shift Cost Burden to Consumers

At a corporate economic forum in Kuala Lumpur, Bank Muamalat Malaysia's chief economist Dr Mohd Afzanizam Abdul Rashid explained that the modest 1.9% consumer price index reflects businesses absorbing rising raw material and fuel expenses. He projected that inflation could increase to 2.2% in 2027, up from an estimated 1.8% for 2026, as firms eventually transfer these costs to consumers. The lag between producer price spikes and consumer price changes suggests a limited window for cost absorption.

World Bank lead economist Apurva Sanghi warned that persistent upstream pressures could reignite inflation risks later this year, citing producer price inflation that rose from negative levels in early 2024 to almost 11% in August. Nevertheless, the World Bank expects headline inflation to stay around 2% in 2026, helped by subsidies that blunt energy price pass-through. The outlook underscores a potential shift in price dynamics if raw material and fuel costs remain elevated.