Executive director Lee Heng Guie said there is a need for the government to properly communicate information to enable the people to anticipate and manage the eventual impact of subsidy rationalisation.

Such a measure was also necessary to contain inflation, he said.

“Price controls can only be used as temporary measures otherwise it will hurt producers and cause them to leave the industry,” Lee told the media during SERC’s Quarterly Economy Tracker briefing.

He also called on the government to deregulate imports and encourage market entry by looking into areas with high import dependency to work out how to increase supply.

SERC also called for more government initiatives to encourage agriculture.

“We are happy the government has taken on board some proposals put forward by the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) for the release of more land with longer tenures to encourage producers to go into farming,” said Lee.

He also called on the government to extend social assistance to vulnerable households and encourage the consumption of made-in-Malaysia products.

Bank Negara Malaysia must also anchor inflation expectations amid a rising inflation environment, Lee said. A failure to do so may give rise to difficulties later on, he added.

“You don’t want to operate in a growing economy where inflation remains high,” Lee said.

In May, Malaysia’s consumer inflation stood at 2.8%, up from 2.2% in the first quarter of 2022, while food inflation went up to 5.2% from 3.8% previously. Core inflation, which measures underlying inflation trends (excluding volatile food and energy), has increased steadily to 2.4% in May, up from 1.8% in Q1 2022.

For 2022, SERC estimates that headline inflation will go up by between 3.0% and 3.5%, higher than the central bank’s estimate of between 2.2% and 3.2%.

Lee conceded that a rise in interest rates will affect many people but added that there was a need to look at overall stability, including that of prices and the labour market.