MARC: Inflation to stay manageable despite SST hike

New Straits Times

16-07-2025

KUALA LUMPUR: MARC Ratings Bhd expects Malaysia's inflation to remain manageable despite the recent upward revision to the sales and service tax (SST).
MARC's chief economist Dr Ray Choy said the global monetary policy environment has turned more dovish, with Bank Negara Malaysia cutting its overnight policy rate to 2.75 per cent in July, following the European Central Bank's easing cycle in 2024.
"Markets are also pricing in two interest rate cuts by the US Federal Reserve by the end of 2025," he said at MARC's recent forum, An Afternoon Talk with MARC: Global Economic & Market Outlook, Geopolitics and Tariff Agendas.
On the domestic outlook, Choy said Malaysia's economy is projected to grow by 4.4 per cent in 2025, supported by resilient domestic demand, including private consumption, investment activity and a sustained recovery in tourism.
He added that the Malaysian bond market remains steady, backed by robust foreign demand for government securities and a positive medium-term growth trajectory.
Commenting on trade trends, Choy noted that the average US tariff rate since 1989 has been around 2.7 per cent, but ongoing trade tensions could push this higher, likely settling in the teens.
"As of 10 July 2025, data shows that the Trump administration reduced initial tariff rates on 59.1 per cent of its trading partners, with average tariff increases of 1.5 per cent and reductions of 7.3 per cent. This reflects a complex recalibration of trade policy and hope for better outcomes on future negotiations," he said.
Meanwhile, Malaysian Rating Corporation Bhd (MARC) group chief executive officer Arshad Mohamed Ismail said that the line between economics and geopolitics is becoming increasingly blurred, posing significant implications for global business strategies, policy decisions and financial stability.
He said that the convergence of economic and geopolitical risks is now more evident than ever, with tariffs being used as strategic levers in US foreign policy and disruptions in global energy markets continuing to impact supply chains around the world.
Arshad added that US tariffs have shifted beyond their traditional economic purpose and now reflect broader political and strategic priorities.
"For corporations and financial institutions, understanding and navigating this complexity is vital for sound planning and risk management," he said.
Arshad said that for open economies like Malaysia, the current global climate demands a more agile and multidimensional approach to competitiveness.