According to analysts at MIDF, there are expectations of a possible reduction in pump fuel prices in Malaysia, which could occur as early as August 2023. The projected reduction involves cutting the RON95 fuel price by 10 cents to RM1.95 per litre.
But analyst firm MIDF also says it expects the government to keep retail fuel prices status quo at least until the end of 2023, subsequently reducing overall inflationary pressure moving forward.
If this fuel price reduction is implemented, Malaysia’s headline inflation for 2023 is estimated to be slightly lower at +2.9%. Non-food inflation is expected to moderate further to +1.3%, while transport prices may experience a deeper contraction of -1.7%.
Retail Fuel Prices and Subsidy
The estimated subsidy cost to the government for every 1 cent decrease in RON95 price is RM0.43 billion. With the proposed price of RM1.95 per litre, the estimated price differential will be at RM1.15, which is lower than last year’s RM1.86. The expectation is that the government will choose the lower retail fuel price to promote price stability and alleviate the cost of living in Malaysia.
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