Image credit: The Star
KUALA LUMPUR: Moody's Investors Service expects to see a stronger disinflationary impact on emerging markets (EMs) as opposed to advanced economies, amid the softening in food and energy prices, coupled with a strengthening of EM currencies against the US dollar compared to last year.
In its Cross-Sector report for Emerging Markets - Global, it said inflation is already within or near central bank targets across most major EMs with inflation-targeting frameworks, and expects price level increases to moderate further by the end of 2024.
"Of the 23 EMs covered in the report, sovereigns in the Asia-Pacific (APAC) region generally have lower levels of inflation, with rates in the low-single digits, and we expect them to stay at these relatively low levels through 2024.
"China (A1; stable), Malaysia (A3; stable) and Thailand (Baa1; stable) in particular stand out, where we forecast year-end inflation of 2.0 per cent, 3.0 per cent and 2.8 per cent, respectively, in 2023," said the credit rating agency.
It also said, in Malaysia, inflation expectations remain relatively in check after having peaked at 4.7 per cent in August 2022, thanks to the central bank's proactive response to global inflationary pressures as they emerged last year.
Malaysia also subsidises essential commodities, which helps to contain inflation from global commodity price shocks, it said.
Overall, Moody's said tightening global financial conditions and recent banking stresses in the US (Aaa; stable) would continue to challenge the global macroeconomic backdrop for EM sovereigns, which would add to their existing domestic challenges.
"Although we expect inflation to slow across most major EMs, the outlook for growth is more mixed," it said.
Source: https://www.nst.com.my/business/2023/06/920366/moodys-stronger-disinflationary-impact-ems-malaysia-inflation-rate-30-pct