INFLATION TO REMAIN HIGH

Economic Report 2008/2009: Inflation to remain high

by Yong Min Wei

fd@bizedge.com

INFLATION is expected to remain high in the second half (2H) of this year and into early 2009 before moderating in 2H2009.

The Economic Report 2008/2009 said the consumer price index (CPI) averaged 4.4% in the first seven months of 2008 compared with 2% in the same period last year due to higher food and energy prices.

Following price adjustments of petrol and diesel in early June as well as electricity tariffs of between 18% and 26% effective July 1, inflation surged in July to reach its highest level at 8.5% since December 1981. Nevertheless, the inflation rate is expected to have peaked for the year. In July, inflation was at 7.7%.

The main contributors to the CPI increase were food and non-alcoholic beverages; housing, water, electricity, gas and other fuels; and transport, said the report.

The food and non-alcoholic beverages group in the first seven months of the year rose 6.9% and contributed 2.2 percentage points to the CPI increase compared with only 2.8% and 0.9 percentage point in the January to July 2007 period.