According to the World Bank, Malaysia's 2023 headline inflation in consumer prices will likely reduce.

In 2023, Malaysia's headline consumer price inflation is projected to decline from the 3.3% forecast for 2022 to between 2.5 and 3.0%, mostly due to the easing of global supply limitations and the stabilization of commodity prices.

The prediction, according to the World Bank, is predicated on the idea that price controls on a select number of food goods and the cap on retail fuel prices will remain in effect throughout the year, minimizing the cost pressures caused by the current levels of global oil and food prices.

In contrast, it predicted that core inflation, which excludes costs for food and fuel, would stay at 3.0 percent in its most recent Malaysia Economic Monitor report, "Expanding Malaysia's Digital Frontier," which was published today.

As a highly open economy, it was stated that Malaysia will remain confronted with significant risks coming from the outside world.

"Shocks to the global economy," the report said, "may produce a sharper-than-anticipated downturn in global GDP. These shocks include higher than expected inflation, tighter financial conditions, deepening recession in key countries, protracted Russia-Ukraine war, and continuing lockdowns in China."

According to the analysis, Malaysia's growth might be reduced by between 1.0 and 0.7 percentage points for every one percentage point fall in the GDP growth of the G7 and China.

A decline in real disposable household incomes as a result of higher prices could also have an adverse effect on the strength of consumer spending, the report noted, adding that broader and more persistent price pressures in Malaysia may require additional monetary policy adjustments to restrain domestic demand in the near future.

"Furthermore, the relatively high levels of non-financial company debt and family debt in the context of tightening financial conditions may have a greater impact on private consumption and investment, it added.

The research states that while core inflation was predicted to be 4.1% compared to 4.2% a month earlier, consumer price inflation in Malaysia eased to 3.8% in December 2022 from 4% in November.

"The lower increase in national inflation was mostly due to the slowing of consumer price inflation in the food and beverage costs. However, Malaysia's inflation has stayed largely steady in comparison to regional peer nations and the rest of the world, largely because of widespread fuel subsidies and price restrictions.

According to estimates, the full elimination of gasoline price subsidies will likely result in a 9.0% increase in consumer prices, with an unequal distribution of the effects across sectors.

According to the World Bank, Malaysia's 2023 headline inflation in consumer prices will likely reduce.

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