However, the risk on the inflation outlook tilts to the upside if the scope of the rationalisation extends to RON95 fuel, it said in a research note today.

“As guided, the implementation depends on the progress of the national utility database (Padu), which is likely to be completed in the first quarter of 2024,” said AmBank.

It said that the government forecasts inflation to be between 2.1% and 3.6% in 2024, reflecting the gradual shift towards a targeted subsidy mechanism, which is expected to be realised in 2024.

For 2023, AmBank Group expects inflation to be in the range of 2.5% to 3%.

Meanwhile, Malaysia’s economic growth is anticipated to remain at 4% for 2023 and is expected to pick up to 4.5% in 2024.

“The weak export sector is anticipated to recover in 2024 due to easing inflationary pressures in major economies.

“On the domestic front, measures announced in Budget 2024, particularly those aimed at boosting consumption, are anticipated to support economic growth,” it said.

However, the bank said the impending subsidy rationalisation, which includes food and fuel products, may lead to changes in consumer spending priorities.

Meanwhile, Maybank Investment Bank (Maybank IB) has maintained its 2024 inflation forecast at 3%, pending more information and details on Budget 2024 measures, especially on subsidy rationalisation.