Malaysia’s inflation rate has been falling, but why are regular citizens still struggling


A composite image of 50 ringgit dollar notes and a shopping complex at Malaysia's Bukit Bintang signifying inflation

As for cost of living and the disconnect felt on the ground by Malaysians, an economist says that it is better thought of in terms of “affordability”. (Photo: Getty Images)

By VINCENT TAN

Jasmine Yeoh and her husband are the doting parents of two young daughters — a toddler and an infant. With she and her husband both in full-time employment, the decision to start a family was not out of the question back in 2019.

In fact, their work situation meant that even when the pandemic hit and their first child was born, the new parents could put aside funds for travelling and other luxuries in anticipation of the country’s COVID-19 restrictions being eventually lifted. The couple also felt secure enough to have a second child.

The sharp rise in Malaysia’s inflation rate between 2021 and 2022, however, caught Yeoh and her husband by surprise.

“We knew our household expenditure would double with two kids, but we weren’t expecting everything to increase in price by 20 per cent to 30 per cent,” she says.

For the record, Malaysia’s headline inflation went up from 2.5 per cent in 2021 to 3.3 per cent in 2022.

This resulted in price increases in various sectors, from tourism to recreation services and culture, and significantly, many calling for the government to sanction more Employee Provident Fund withdrawals.

Since then, the situation has improved greatly, with the Department of Statistics Malaysia (DoSM) posting figures of 1.8 per cent in October 2023 and then 1.5 per cent in November.

Even so, regular Malaysians like Yeoh and her husband appear to be still struggling.

Inflation and the affordability of goods

According to the Consumers’ Association of Penang (CAP), it has not recently received complaints on the overall cost of living situation. However, there have been complaints about specific items and goods.

“It is obvious that prices of things have gone up over the recent months. One recent example is onions, which went up by almost 100 per cent over a two-week period,” said CAP president Mohideen Abdul Kader.

Yet, the current situation is easily explained, says economist Prof Dr Geoffrey Williams.

According to the Dean of the Institute of Postgraduate Studies at Malaysia University of Science and Technology (MUST), a slower inflation rate does not mean that prices will not rise. However, data shows that increases are slower and more in line with the historical average.

“This means that prices are more stable, but still high,” Prof Williams said, adding that the situation benefits both businesses and consumers.

“For businesses, it means that they aren’t passing on higher costs to consumers. So, this should be better for sales and competitiveness.”

In terms of consumers, meanwhile, a slower inflation rate means day-to-day expenditure could become more affordable when earnings potentially catch up.

As for cost of living and the disconnect felt on the ground by Malaysians like Yeoh and her husband, Prof Williams says that it is better thought of in terms of “affordability”.

“If prices are high, but your income is high, you can still afford your spending,” he said.

Thus, people should not expect prices to decrease quickly or at all.

“Prices are ‘downward sticky’ (resistant to change despite changes to output costs or demand),” the economist said, pointing out that only some sectors, such as communication services, have seen falling prices.

Is there a way to toughing inflation out?

Be that as it may, the bigger problem, Prof Williams notes, is that incomes are not rising fast enough, especially for the middle-income group. Hence, affordability or cost of living issues remain a concern.

This, then, is why CAP president Mohideen’s advice to consumers is to be prudent in spending and for those facing cash flow problems, to invest wisely.

Mohideen added that while government subsidies and aid are not a permanent solution, they are inevitable given the current situation. He feels that targeted subsidies on essential goods, especially for those in the B40 and M40 (Bottom 40 and Middle 40) economic groups, should be introduced immediately.

The Central Database Hub or PADU (launched on Jan 2), enables the government to reach out to those who are really in need of assistance more systematically.

“However, they also need to seriously consider the establishment of a universal social security scheme to ensure the poor will have a ‘security net’ to fall back on,” Mohideen said.

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This article was originally published by a malaysia.news.yahoo.com . Read the Original article here. .