KUALA LUMPUR: Public Investment Bank Bhd (PIVB) has estimated that eliminating fuel subsidies for the Top 20 per cent income group earners (T20) would increase inflation by an additional 0.45-0.75 percentage points (ppts) annually.
In a note yesterday, the investment bank said although headline inflation which includes food and energy prices in the country had exhibited a downward trajectory in recent months, primarily driven by the tempering of various cost factors, core inflation (excludes food and energy prices) is poised to persist at elevated levels due to the robust state of demand condition.
“The continued implementation of price controls and fuel subsidies will serve as partial mitigating factors, curbing the extent of inflationary pressures.
“(Nonetheless,) it is essential to acknowledge that the inflation outlook carries a notable risk bias toward the upside, remaining acutely vulnerable to potential shifts in domestic policies pertaining to subsidies and price controls as well as developments within financial markets and global commodity prices,” it said PIVB noted that without petrol subsidies, it is estimated that the actual price of RON95 has reached approximately RM3.22 per litre compared to the present RM2.05 per litre. “We believe that the subsidy ceiling for RON 95 and diesel, set at RM2.05 and RM2.15 per litre may be subject to review and potentially increase gradually in the latter part of the year,” it said. – BERNAMA
