Malaysia has never experienced hyperinflation - Economy Ministry

Photo for illustrative purposes only – 123RF

KUALA LUMPUR – Hyperinflation has never happened in Malaysia and the government hopes it will never happen, according to the Economy Ministry.

It said the highest inflation rate ever recorded in Malaysia was in 1974 at 17.3 per cent.

“The inflation hike that year was caused by the global crude oil price crisis.

“Due to the diversity of economic resources, the country is not exposed to any particular cause for a sudden increase in inflation,” the ministry said in a published reply on the Parliament’s website dated Nov 27 to a question from Senator Abdul Nasir Idris who asked the Economy Minister to state the extent of the government’s readiness to avoid hyperinflation due to the floating of chicken prices, the abolition of diesel subsidies and the increase in rice prices.

The inflation rate is measured through the Consumer Price Index (CPI) to assess the change in the average price of items in a fixed basket of goods and services for a specific period of time.

The optimal inflation rate is usually around two to three per cent. Based on a report by the World Bank, hyperinflation will occur if the inflation rate exceeds 50 per cent.

Among the causes and factors of hyperinflation is the sudden fall or increase in oil prices and an unsustainable fiscal position leading to a fall in the value of the local currency and an increase in inflation.

Also, the action of the central bank that prints currency excessively and its failure to implement appropriate policies according to the current economic conditions also contribute to hyperinflation.

Meanwhile, the Economy Ministry said the government is always aware of current issues involving the interests of the people, especially in relation to the increase in the cost of living and inflation.

“The government has decided to end subsidies and chicken price controls on Nov 1, 2023 after taking into account the easing of food inflation.

“The move to revise the diesel subsidy is not expected to have a major impact on inflation since the proposal to revise the diesel subsidy only involves private vehicles,” it said.

According to the Economy Ministry, in order to ensure that hyperinflation does not occur due to the increase in the price of rice, the Ministry of Agriculture and Food Security (KPKM) has announced several intervention measures including the launch of the Special Local White Rice Programme as a short-term measure to overcome the issue of lack of local white rice supply.

“Based on the country’s stability and strong and resilient economic base, the government is confident that it will be able to manage the economy better to ensure the well-being of the people is preserved.

“This is supported by the structured policies announced such as the Mid-Term Review of the 12th Malaysia Plan, the New Investment Policy (NIP), the New Industrial Master Plan 2030 (NIMP 2030) and the National Energy Transition Roadmap (NETR) which will attract more investments to boost the national economy,” it said. – BERNAMA