The inflation rates are much higher among the urban poor, according to Bank Negara Malaysia’s (BNM) 2015 annual report.

“People say, you talk about inflation, but my cost of living doesn’t jive with the inflation numbers,” BNM Deputy Governor Dr Sukudhew (Sukhdave) Singh said in his keynote address on a discussion of the Malaysian economy.

“What we observe when we look at the lower-income categories is also that sometimes people make bad financial decisions.

“Because of this, they go into over-indebtedness. That plays a corrosive role on their economic welfare.”

According to the report, inflation rates tend to be higher in more urbanised states and lower-income groups.

For example, the average inflation rate for food and non-alcoholic beverages in highly-urbanised states like Kuala Lumpur, Selangor and Penang was 2.5% last year, compared with 1.4% in less urbanised states.

Housing, water, electricity, gas and other fuels saw average inflation rates of 3.5% compared with 0.3% in less urbanised states.

Lower-income groups, the report noted, spend a larger share of their expenditure on food and so experienced higher inflation.

The lower-income groups also benefitted less from the decline in domestic fuel prices during the year given the lower share of expenditure on fuel.

“Thus, the lower-income households living in highly-urbanised states tend to experience the largest increase in cost of living,” the report concluded.