July 23rd, 2009 by Hafiz Noor Shams
Remember the immediate previous post about deflation in Malaysia and how it was expected to succumb to inflation later in the year?
Yesterday, being a centrally-planned economy that Malaysia is, the Cabinet decided against a hike.
KUALA LUMPUR, July 22 — Malaysia’s government today vetoed price hikes for electricity and natural gas, fearing a repeat of anti-government protests that saw its popularity slump in 2008.
Under proposals discussed by the cabinet today, the country’s influential Economic Planning Unit had suggested a 24.6 per cent rise in the price of natural gas and a 4.9 per cent hike in electricity prices from Aug. 1 to reflect the rising cost of energy. [Malaysia government rejects energy price hikes. Bernama via The Malaysian Insider. July 22 2009]
I am not sure if inflation will come back as soon as analysts predicted earlier. I know, I know, they based the return on the expected hike of taxi and bus fare hike. But I think this decision can potentially affect inflation expectation in a way that prolongs the deflation.