Economist warns Malaysians will still face rising costs due to global pressures and imported inflation despite fuel stability
PETALING JAYA: Malaysians will continue to feel the pinch of rising living costs even if petrol prices are stabilised, as deeper structural and global pressures keep driving inflation, warned Universiti Teknologi Malaysia economist Prof Dr Nanthakumar Loganathan.
“Inflation occurs when production costs rise across the business cycle. This includes increases in labour, transport, diesel or petrol, rent and other unexpected costs that producers must absorb. Consumers ultimately face higher prices as a result.”
He said higher prices of imported goods are also adding to inflation locally, pointing to Malaysia’s reliance on imports, especially for daily necessities.
“While subsidies and maximum price controls offer some relief, they cannot fully reduce market prices.”
Nanthakumar said although the ringgit has strengthened over the past year, giving Malaysia more purchasing power, many exporting countries are dealing with rising costs in their own markets.
“Goods imported from these countries remain expensive. For example, Thailand is currently facing a domestic oil shortage which is likely to push up the cost of its exports.
“Malaysia, as an importing nation, will feel the effects of this ‘imported inflation’ in the domestic market.”
“Subsidising fuel in the current global context places significant pressure on the government’s fiscal position.
“Inflation is difficult to control because the production cycle continues to face both direct and indirect cost increases due to the global oil crisis.”
He said all sectors of the economy are affected but transport and manufacturing are among those hit the hardest.
“Energy costs play a crucial role in these sectors. The oil crisis affects not only production but also electricity generation, which relies heavily on non-renewable sources like coal and gas.
“Imported coal prices are rising globally, directly affecting the cost of electricity locally.”
Nanthakumar said more broad-based policies are needed to help ease the rising cost of living.
“The government should strengthen fiscal policy and adopt more targeted spending, ensuring that support reaches those most affected.”
He said assistance should not be limited to the B40 group as the M40 are also feeling the pressure from rising costs.
“Providing targeted subsidies to businesses can help mitigate cost increases during the production cycle.
“Alongside fiscal tools like taxes and subsidies, monitoring and managing production cost factors can gradually reduce cost-push inflation.”
He said without a wider and more balanced approach, Malaysians would continue to feel the strain despite temporary relief from fuel subsidies.