Inflation in Malaysia

Gulzira Shalgymbayeva 1100602428

 Introduction

Cost-push inflation is a type of inflation that can occur in Malaysia when raw material and fuel prices rise. Cost-
push inflation occurs in an economy when overall prices rise (inflation) as the cost of fuel and raw materials
rises. Higher production costs can reduce the economy's aggregate supply (the amount of total production).
Because demand for goods has not changed, production price increases are passed on to consumers, resulting in
cost-push inflation. For example, the cost of raw materials or inventory used in manufacturing may rise,
resulting in higher costs.
 Malaysia's economy has been steadily growing in recent years, increasing by 4.3% in 2019 and 4.8% in
2018. However, the pandemic's impact pushed the economy into negative territory, with -6% growth in
2020.

 In 2020, inflation is expected to be 1.1%, down from 1.0% in 2018 and 0.7% in 2019. This was driven by
the ringgit's depreciation, a drop in oil prices, and a drop in commodity export prices. Inflation is expected
to rise to 2.4% and 1.9% in the next two years, according to the IMF.
Malaysia's inflation rate in October 2021, as measured by the Consumer
Price Index (CPI), increased 2.9% from the previous year.

Inflationary pressures have a negative impact.

 Reduce purchasing power.
 Increase in cost of borrowing.
 Increase in unemployment.
 Rise in the price of import.
 Reduce national saving.
 Increase in hoarding.
 Due to pandemic-related restrictions, the unemployment rate is expected to rise from 3.3% in 2018 and 2019
to 4.5% in 2020. Nonetheless, the IMF predicts a drop to 3.8% in 2021 and 3.6% by 2022.
 Malaysia's inflation, as measured by the consumer price index (CPI), increased 2.2% year on year in March
2022, primarily due to a 4% increase in the CPI's food and non-alcoholic beverages segment, as prices for
food items such as chicken and vegetables increased by more than 10%.
 Transportation group increased by 3.9%. Furthermore, Food & Non-Alcoholic Beverages increased by
3.5%, followed by Furnishings, Household Equipment, and Routine Household Maintenance (3.0%),
Restaurants & Hotels (2.9%), Miscellaneous Goods & Services (1.9%), and Recreation Services & Culture
(1.9%).
In November 2022, the central bank predicted that headline inflation would have
peaked, with an annual inflation rate of 4.0% in November and October 2022.
Conclusion

Inflation affects businesses and economies because growth rates must be greater than inflation
in order for net savings or net investments to grow. In other words, below-inflation growth
means that industry has less money for dividends, investments, and future growth. This is why
national central banks frequently employ monetary policy that focuses primarily on inflation.
One way central banks can target inflation is by keeping interest rates high. This means that an
interest rate of 11% when inflation is 10% means that one's savings are growing rather than
depreciating.