Malaysia’s annual inflation rate increased to a 16-month high of 4.7% in August of 2022 from 4.4% in the prior month, matching market consensus. Food prices rose by 7.2 per cent, the most on record, after a 6.9 per cent gain in July. Additional upward pressures also came from cost of housing (4.1% vs 3.8%), transport (5.2% vs 5.6%), alcoholic beverages & tobacco (0.7% vs 0.6%), furnishing & household maintenance (4.3% vs 4.2%), clothing (0.3% vs 0.3%), health (0.9% vs 0.8%), recreation (2.7% vs 2.5%), education (1.2% vs 1.2%), restaurants & hotels (6.4% vs 5.8%), and miscellaneous goods & services (2.4% vs 2.1%). Core consumer prices, which exclude volatile items of fresh food and administered prices, rose 3.8%, the steepest gain on record, after a 3.4% rise in July. Every month, consumer prices were up 0.2% in August, the least in four months, after a 0.4 per cent rise in July.
Economic uncertainty, global political unrest, and the ripple effects of Covid-19. These are just a few factors in the rise of the inflation rate.
Nonetheless, the inflation rate in Malaysia was one of the lowest in the world.
Most economists expect inflation to trend higher this year to reflect the rise in commodity prices and wages, but do not expect inflation to accelerate rapidly like in the US as domestic fuel subsidies limit the upside.
I believe the minimum wage policy is one of the key drivers of inflation which ultimately create a labour cost “snowball effect” for employers, pushing labour costs higher across all positions. But I am not denying global supply chain disruptions, escalating commodity prices, labour shortages and expiry of the government’s price control schemes, and potential subsidy rationalisation programmes contribute to this hike.
Businesses must plan for increased inflation and interest rates in this environment. Inflationary pressures reduce consumer spending and force firms to face greater business costs. If they are unable to fully pass on expenses, earnings will suffer.
Globally, there is a possibility of high inflation, prolonged periods of inflation, and decreased (economic) growth. This situation makes me very concerned if the government’s poor policies lead to a recession.
And it’s not going away anytime soon. With rising food, gas, and utility prices throughout the world, it’s no wonder that the workforce is feeling the pinch of inflation.
Employees’ psychological safety is jeopardised due to economic stress, leading to lesser involvement, silent resignation, and an increase in turnover. According to a Merdeka Centre in 2021 and Mindshare research, Malaysians with low income faced economic difficulty owing to price increases a year ago and may picture the scenario currently.
We urge the government to find a solution to the instability of inflation and to get through internal bureaucratic roadblocks so the measures may be implemented as soon as possible, giving the industry an instant boost to get over the inflation “hump.”
In the context of the COVID-19 incident, companies that act promptly succeed and endure. I sincerely believe that the present government must act quickly before businesses follow the layoff procedure and further destabilise our economy. – airtimes.my
DISCLAIMER: Air Times News Network is not responsible for opinions expressed through this article. It’s the columnist’s personal view and doesn’t necessarily reflect our stance.
