KINIBIZ Another round of mid-year petrol price hikes is inevitable, economists say, if the government is to meet its 2014 Budget promise to cut RM7.3 billion or 16 percent in spending on subsidies this year.
"We anticipate further reduction in petrol subsidy in mid-2014 in line with the government’s subsidy rationalisation plans," AmResearch economist Patricia Oh Swee Ling said yesterday, reiterating similar statements made in March.
Oh’s prediction is for a 20 sen a litre increase in the price of diesel and RON95 petrol, similar to the increase put through by the government last September.
For Prime Minister Najib Abdul Razak, who has often been apprehensive on painful but necessary reforms to narrow the fiscal deficit, the time could not be more ideal.
Inflation rates have stabilised over the past few months, making further subsidy cuts more palatable.
"The stabilising rates will allow the government to add price pressure to the system," prominent economist and Malaysia University of Science and Technology dean of business school Yeah Kim Leng said.
Inflation rates started increasing in October 2013 after the first round of post-election subsidy rationalisation measures involving the elimination of the sugar subsidy and the 20 sen petrol hike to current rates.
This was followed by a Jan 1 adjustment of electricity tariffs.
Between February to April, inflation rates have averaged at or just under 3.5 percent.
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