RON 95 and diesel in Malaysia expected to follow global market price in 2023

Road users are expected to pay more for RON 95 petrol and diesel in 2023. This is because the government is expected to scrap the current blanket fuel subsidy system, RON 95 and diesel will likely follow the global crude oil pricing.

As such, Maybank Investment Bank (Maybank IB) warns that there will be a sharp rise in prices for RON 95 and diesel in the coming year.

As it is, the Ministry of Finance is already testing a new targeted subsidy mechanism. The trial runs started in July and are expected to run for six months.

Maybank IB’s projects that there will be a revision during the tabling of the Budget 2023 scheduled for 7-October-2022.

Also read: Up to 6 months study needed before MoF can implement new targeted fuel subsidy mechanism

The Maybank IB note was prepared by three investment bank analysts: Dr Zamros Dzulkafli, Suhaimi Ilias, and Fatin Nabila Mohd Zaini.

According to a report by Berita Harian, Maybank IB projects the 2022 inflation rate to drop to 3.3 percent compared to the 3.4 percent as previously predicted. The inflation rate for 2023 is expected to hit 4.0 percent compared to the previous prediction of 4.1 percent.

Also read: MoF: Current revenue not enough to cover RM 40 billion subsidy costs; Unable to sustain blanket subsidies

The investment bank explained that the projection also considered the effect of the rationalisation of price subsidies that had been announced and was expected to be implemented by the government.

Maybank IB’s forecast for 2023 also takes into account the adjustments in fuel prices and electricity tariffs following the subsidy review in 2023.

Also read: MoF: E-wallets under trial for targeted fuel subsidy

At the moment, RON 95 has a ceiling price of RM 2.05 while diesel is set at RM 2.15.

In a separate post, Finance Minister Tengku Zafrul released a note on his official Twitter account explaining that Malaysia has one of the lowest inflation rates in the world. This is partly due to the high subsidy bill which is projected to reach RM 80 billion, the highest in history.

Also read: MoF: Removal of fuel subsidy might worsen Malaysia's inflation to around 11%

As of August, the government has spent RM 77.7 billion on subsidies and fuel subsidies make up the largest portion of that amount at RM 41.7 billion.

He quoted that the Department of Statistics Malaysia (DOSM) found that without subsidies, Malaysia’s inflation rate could reach 12 percent, one percent more than previously predicted.