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Malaysia, we have ZERO inflation for 2020?

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Everyone is scared of inflation. They always say the official inflation number does not reflect the situation on the ground. Well, I think they failed to understand that the inflation number is also about how much we spend as well. So, if inflation our friend or foe? (earlier article) Well, for 2020, we do not need to argue I think. With the current Movement Control Order (MCO), our ability to buy a lot of things is curtailed.

Yeah, we can shop online but the truth is, those expensive lunches and dinners we used to eat has now turned to instant noodle and one egg yeah… So, the spending has reduced tremendously and this will affect our inflation numbers for 2020. Briefly, the inflation number is expected to be ZERO for 2020. Perhaps some may hope that the property price will also stay at zero reduction this year since there are so many predictions that it will be dropping.

Article in themalaysianreserve.com . RAM Rating Services Bhd (RAM Ratings) has revised its inflation forecast for Malaysia this year to 0% from 0.7%. Reasons include weak global oil prices, generous discounts for household electricity bills and subdued demand. It said in a statement, “Going forward, we envisage a deflationary trend in the second and third quarters of this year. A key trigger of the downward revision is the likelihood of a deeper and more persistent weakness in oil prices amid a supply glut.”

It also said that the downward inflation is also due to the substantial discounts on electricity tariffs for households as announced under the COVID-19 stimulus plan. There are rebates on electricity tariffs which included discounts of up to 50% for six months depending on usage. RAM Ratings said, “Given the 2.7% weight of electricity in the overall Consumer Price Index basket, this initiative is estimated to ease inflation by another 0.2 percentage point.” Please do refer here for the full article: Article in themalaysianreserve.com

I do not think many would think a high inflation is good. Prices of goods and services kept going higher while our increment is struggling to keep up. However zero inflation for a long time I also think it’s not a good sign for the economy lah. It meant that everything stays the same, so of course property price will also stay stagnant. Not so realistic lah. If inflation is zero, then why give salary increments?

Of course, when the inflation is low, the economy shows a slowing down sign and the next one to go lower may be the interest rate. There is already that potential. Lower mortgage rates would be lower fixed deposit rates too So, for 2020, just enjoy all these low numbers and perhaps take advantage of it yeah. I am not so sure if everyone loves to buy when the interest rate is high yeah. Happy understanding.

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