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COMMENT | Deflation – A boon or bane for Malaysia?

Sofea Azahar

Published
6

COMMENT | Following the outbreak of the Covid-19 pandemic, then echoed by an economic crisis, price levels have fallen, which resulted in what economists refer to as deflation.

Deflation is defined as an overall decrease in price level so that the inflation rate becomes negative. It is generally not a good sign for the economy as it tells us about the state of demand in a country.

According to World Bank data, apart from weak global crude oil prices, other global commodity prices such as agricultural products, raw materials and metals have fallen since February.

In April, Malaysia’s inflation rate, measured by its consumer price index (CPI), remained in the negative territory with a drop of 2.9 percent from a year earlier (-0.2 percent in March). On a monthly basis, the inflation rate fell 2.7 percent compared with March.

The sharp drop in prices was mainly hindered by transportation expenses (-21.5 percent) and spending on housing, water, electricity, gas and other fuels costs (-2.2 percent).

The downward pressure in prices is justifiable and has been expected since the movement control order (MCO) took place beginning March 18. It has adversely affected businesses and households...

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