For the first time in 51 years, Malaysia recorded a full year deflation or drop in the Consumer Price Index(CPI) of 1.2% in 2020, accompanied by the current economic recession. 1969 was the last year Malaysia recorded a deflation of 0.41% also accompanied by an economic recession.
Clearly the deflation was caused by the COVID-19 pandemic-induced recession, where the Movement Control Orders(MCO) limited economic activities and aggregate demand. Both the fiscal measures such as the RM305 billion Prihatin economic stimulus package, or the monetary measures of reducing by 100 basis points in both the Overnight Policy Rate(OPR) from 2.75% to 1.75% or the Statutory Reserve Requirement from 3% to 2%,, could not lift the economy out of its recession in 2020.
For 2021, the government must act bolder against the current economic recession to save jobs, businesses and our economic livelihood. Despite adding 3.9% to the fiscal deficit, a RM45 billion economic stimulus package urgently needed to counter the contraction of the economy underscored by the in CPI or deflation in 2020. With the projected deficit at 5.5% for 2021, this fiscal injection of RM45 billion into the economy will increase the deficit to 9.4%, but will help to quickly pull the economy out of its recession.
Despite Deflation, Ordinary Malaysians Are Paying More Compared to Last Year or Last Month For Essential Items, Like Food And Beverages.
Apart from looking at the drop in CPI of 1.2% for the whole year of 2020 compared to 2019, we have to analyze them by categories and compare them on a monthly basis. What is worrying is that although, year-on-year(YOY) the CPI has decreased by 1.4% in December 2020 compared to December 2019, CPI on a monthly basis increased by 0.5% in December 2020 as compared to November 2020.
Of greater concern is that prices of essential items, especially food and beverages, have also gone up not just month-on-month(MOM) but also year-on-year(YOY). In other words, Malaysians are paying more compared to last year or last month. This will cause greater suffering to ordinary Malaysians facing declining revenue or loss income during this economic recession and yet have to pay higher prices. See table below.
|
|
Food & beverages |
|
|
|
YoY |
MoM |
|
Jan-19 |
1.0% |
0.9% |
|
Feb-19 |
1.0% |
0.2% |
|
Mar-19 |
1.1% |
-0.5% |
|
Apr-19 |
1.1% |
-0.2% |
|
May-19 |
1.2% |
0.3% |
|
Jun-19 |
2.3% |
0.1% |
|
Jul-19 |
2.4% |
0.3% |
|
Aug-19 |
2.6% |
0.2% |
|
Sep-19 |
2.2% |
-0.2% |
|
Oct-19 |
1.8% |
0.1% |
|
Nov-19 |
1.5% |
0.0% |
|
Dec-19 |
1.7% |
0.5% |
|
Jan-20 |
0.9% |
0.1% |
|
Feb-20 |
0.8% |
0.1% |
|
Mar-20 |
1.2% |
-0.1% |
|
Apr-20 |
1.2% |
-0.1% |
|
May-20 |
1.2% |
0.3% |
|
Jun-20 |
1.6% |
0.4% |
|
Jul-20 |
1.4% |
0.1% |
|
Aug-20 |
1.3% |
0.1% |
|
Sep-20 |
1.4% |
-0.1% |
|
Oct-20 |
1.5% |
0.1% |
|
Nov-20 |
1.4% |
-0.1% |
|
Dec-20 |
1.4% |
0.5% |
- Food & beverages (up 1.4% YoY and up 0.5% MoM)
- Vegetable prices rose 3.6% YoY and 2.9% MoM
- Ginger 24.3% YoY up
- Red chili 15.6% YoY up
- Green chili 12.3% YoY up
- Cabbage 12.1% YoY up
- Meat up 1.2% YoY, up 2.2% MoM
- Health (up 1.0% YoY and unchanged MoM)
- Education (up 0.6% YoY and unchanged MoM)