Malaysia – GST to boost full-year inflation

Malaysia will announce April inflation on 22 May. The headline CPI is expected to have risen by 2.1% y/y, versus 0.7% y/y in Q1. The acceleration in inflation is largely due to the implementation of the 6% goods and services tax (GST) in April. However, due to mitigating factors, such as the concomitant removal of the sales and service tax and the exemption of various items from GST, the overall impact of GST is expected to be benign. 

Standard Chartered's full-year inflation forecast is 2.2%, within the central bank's forecast range of 2-3%. Despite the rise in inflation, the central bank's focus is likely to be slanted more towards growth than inflation, particularly given that the second-round effect of GST implementation will likely be limited.