My Longkang

YEOW POOI LING made the following analysis of the impact of higher fuel cost

The hike in petrol and electricity tariffs that will send prices skyrocketing. There will be increases in food prices and prices of goods. Inflation might rise to 4% to 5% this year. But the real inflation effect could be considerably larger.

Malaysia’s petrol prices were deemed among the lowest in the region, average salaries are not among the highest.

“These are drastic moves, which would lead to erosion in consumers’ disposal incomes and sentiment turning cautious,” said Bank Islam Malaysia Bhd senior economist Azrul Azwar.

He said consumers were likely to cut back on travel and vacation, and eating out in restaurants and hold back spending on “big ticket items” like property and cars. This cut in consumer spending would hit the economy. Sectors like retail, consumer, property and automotive would also be negatively impacted.

As inflation was driven by rising cost and not demand, it would be a tough call for Bank Negara to curb the pressures, he said.

“I hope the central bank would not increase interest rates as it would affect the economy and consumer spending further,” Azrul added.