Annuar Musa said our inflation is among the lowest. But here’s what he didn’t say

Malaysians were mashing the Doubt button hard when Communications and Multimedia Minister Tan Sri Annuar Musa announced that Malaysia had among the lowest inflation rates in Southeast Asia:

“We are grateful that our country has one of the lowest inflation rates in the world. The inflation rate of 2.8% is among the lowest in ASEAN and a lot lower than many advanced nations.” – Annuar Musa

Well, we decided to take a closer look at that ‘among the lowest in ASEAN’ 2.8% number, and found out that…

 

We were actually the lowest in May, but Vietnam has overtaken us

So yeah, we did finish with the lowest inflation rate in ASEAN, but as it turns out, that isn’t the case any more, as those were the stats for the month of May. As of the month of June, Vietnam topped (bottomed?) the list with  3.37%, while Malaysia were close behind with 3.4%. 

(Btw, the lower the score, the better, cos lower inflation)

Credit where it’s due, finishing in second place is still quite the feat, especially considering that some countries have it much, much worse (like Laos, which charted a whopping 23.6% inflation rate in June).

But that doesn’t mean Malaysia’s in the clear; despite finishing with the lowest inflation in May, 2.8% was actually a 5-month high for us, and our current (June) number of 3.4% is a 1-year high. In other words, maybe not as bad as some others, but inflation is still pretty high in Malaysia, especially compared to the past couple of years.

And as it turns out, we (mostly) have the West to blame for our troubles, because…

 

Inflation here is indirectly caused by inflation in the West

Yep, you guessed it: it’s the Russia-Ukraine war again. And far from just robbing us of McDonald’s hash browns, it’s actually hurting us everywhere else too. The primary reason is that foreign direct investment (FDI) from advanced economies is the primary source of external finance in ASEAN economies. And because inflation has increased by 5% in advanced economies, banks in those countries are being more kedekut with their money, which drives up prices, and will in turn, discourage investment.

Hence, inflation in advanced economies = inflation in ASEAN economies, because they can’t spend money on us.

With that being said, the Malaysian government’s enactment of high subsidies (which currently stand at RM77 billion, but could reach RM80 billion by year’s end) has softened the blow somewhat, though Finance Minister Tengku Zafrul has warned that this method is not sustainable. Regardless, this has not prevented Malaysians from protesting, calling for ministers to take a pay cut. While Annuar Musa argued that such a move would not solve the inflation situation, PKR deputy president Rafizi Ramli counter-argued that it would be more of a show of solidarity than anything else, similar to what New Zealand’s government did:

“The insistence that ministers take a pay cut is not to reduce the price of goods. It is a symbol of the people’s wishes regarding a number of issues related to the current crisis of rising goods.” – Rafizi Ramli

As things stand, prices could go even higher in September, but…

 

It is a global inflation after all, and the govt is doing something about it

As much as we want to find one single entity to blame, it’s not so simple. To be fair, there have been a number of things that the government has done to try and help the situation, such as creating an anti-inflation task force, subsidies, and raising the minimum wage. Because let’s face it, the prices we have now are with subsidies still in place; it’s essentially a filtered version of what they would be in a free-fall economy. Whether or not subsidies are the best solution for the situation, that’s a debate for another time.

On the other hand, perhaps if the government was better at communicating why we have these measures, and how exactly they work, it would help ease Malaysians’ concerns slightly.