KUALA LUMPUR: Inflation appears to be partially mitigated due to the price intervention measures by the government for retail petrol and food prices, but vigilance should still be on a high level.

       While higher global energy prices have contributed significantly to inflation in many countries, the direct impact has been somewhat contained in Malaysia, according to the Bank Negara 2021 economic, monetary and financial developments report.

       “This is due to price interventions, namely price controls on retail fuel and electricity tariff regulations, which have mitigated the impact on consumer prices despite the surging global crude oil and coal prices.

       “Recently, price controls on key food items have further alleviated price pressures for the consumers,” it said.

       It also noted that while shipping costs have risen globally, the severity has been less pronounced in regional Asian economies including Malaysia.

       “Cost increases on regional Asian economies have been relatively contained, in part reflecting the proximity to the global manufacturing hub,” it said.

       Shipping cost increases are mainly seen in the sharp rebound in import demand from the United States, according to Bank Negara.

       “Such a surge in demand has put an upward pressure on costs.

       “The shipping cost from China to Europe and South America has quadrupled in 2021,” it said.

       While inflationary pressures are expected to remain manageable in the country moving forward, it said high vigilance is needed as inflation could have some upward pressures.

       “The vulnerability remains, especially given recent geopolitical developments,” it said.

       Some essential food items, including fresh meat, are Covid-sensitive and could see larger price pressures that could bring about negative consequences to the cost of living factor, according to the central bank.

       Businesses are increasing prices in anticipation or higher inflation while workers are persistently demanding for higher wages to make up for the expected loss in purchasing power, it said.

       “Nonetheless, this remains a tail risk. For 2022, while the inflation outlook is subject to upside risks, the headline inflation is projected to remain manageable,” it added.