Malaysia's inflation rate which decreased to 1.9 percent in August 2024 has raised concerns about the implications of the RON95 targeted subsidy mechanism.
Bank Muamalat Malaysia Bhd Chief Economist, Dr Afzanizam said RON95's large contribution of 5.0% to the Consumer Price Index (CPI) places it as a key factor in determining future inflation trends.
Although the inflation rate was recorded lower in August 2024, it was largely contributed by price stability in the food and beverage (F&B) sector.
Therefore, he warned that the plan to abolish the RON95 subsidy could put pressure on prices if not handled carefully.
The use of RON95 is already considered a necessity of life for Malaysians and any subsidy adjustment needs to be well researched.
In addition, the government also needs to ensure that pricing behavior among businesses is scrutinized to avoid excessive price increases and allow them to earn extraordinary profits.
Mohd Afzanizam said as Malaysia prepares to face this economic change, the management of the RON95 subsidy will play an important role in maintaining stable inflation in addition to ensuring consumer confidence in the market.
Recently, the Department of Statistics Malaysia (DoSM) said Malaysian inflation eased to 1.9% in August 2024 driven by price increases at restaurants and utilities as well as more expensive food.
However, the CPI figure increased to 133.2 compared to 130.7 recorded in the same month of 2023.
