The inflation rate is expected to reach 2.9% in 2025, driven by domestic subsidy reductions and global economic uncertainties, according to Allianz SE chief economist Ludovic Subran. He highlighted that the gradual removal of subsidies for energy and essential goods is a significant factor behind the inflation forecast, affecting household spending power and consumption.
Subran also noted, “The combination of tighter fiscal policies and reduced purchasing power has created an uncertain economic environment.” External pressures, such as China’s economic slowdown, further contribute to Malaysia’s inflationary outlook, potentially impacting export revenues.
The ongoing subsidy reforms aim to address fiscal deficits but have raised living costs. Subran emphasized, “The 2.9% inflation rate is still manageable and could worsen if domestic demand does not recover or global economic conditions deteriorate.” He suggested targeted subsidies or fiscal incentives to mitigate the impact on lower-income households while continuing fiscal reforms.
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