With the Pangkalan Data Utama (PADU) socio-economic database on the way to being done and dusted, for the most anyway, the focus and attention is back on the topic that is intertwined with it, that of targeted subsidies. Although the government has stated it plans to implement it this year, with that for RON 95 petrol previously stated to begin sometime in the second half of 2024, nothing has yet come in the way of a mechanism or how subsidies will be dispensed.
However, there’s no doubt that it will come, and when it eventually does, there’s a larger, darker picture beyond wondering whether one qualifies for aid or not, as the hike in petrol and diesel prices as a result of the removal of a blanket subsidy means that things beyond that are also inevitably going to go up.
As The Star reports, economists are unanimous that petrol subsidy rationalisation is almost certainly going to bring about a general increase in the prices of goods and services, including logistics.
Executive director at the Socio-Economic Research Centre (SERC), Lee Heng Guie, has no doubt that the gradual removal of petrol subsidy via targeted rationalisation will stoke inflation. This is because the increase in petrol and diesel prices will have indirect effects on prices of goods and services, which are related to fuel and transportation, he said.
“The magnitude of price increases, which will contribute to headline inflation, will depend on the degree of the petrol price adjustment, which we believe will be on small steps rather than an outright free floating of the RON 95,” he told the news publication.
Given that inflation is presently on the rise, amplified by the impact of a weak ringgit, he said that a complete removal of fuel subsidies would exert significant price and cost pressures on households and businesses.
While all households will be affected by an increase in fuel prices, he nonetheless reiterated the fact that the targeted fuel subsidy intiative remains integral to the government’s overall fiscal reform. “This would be carried out with other rationalisation of other subsidised items and expenditure, as well as revenue enhancement to consolidate the fiscal deficit,” he said.
Senior economist at UOB Global Economics & Markets Research, Julia Goh, echoed Lee’s sentiments, saying the extent of the effects stemming from the removal of a blanket subsidy will depend on the size and timing of the implementation, adding that the scope of the targeted assistance aimed at easing the burden of increased living costs will also be a factor.
Professor of economics at Sunway University, Yeah Kim Leng put forth some numbers as an impact gauge. Citing the 2022 Household Expenditure Survey, which reported the average monthly household expenditure on petrol being RM305, a 20 sen to 30 sen increase in the RON 95 pump price would see the average household incurring a RM30 to RM45 increase in monthly fuel spending, he said.
“The spending increase is less than 1% of total monthly expenditure of RM5,150 for the average household,” he told the publication. He said the estimated rise in monthly household expenditure, which is spread over a three to six-month interval, suggests that the subsidy rationalisation will not be overly disruptive to the middle class, given that average income or wage is projected to rise at 2% to 3% annually.
As put forth by the report, this mention should ease concerns of the M40 group, who are – with some exceptions – most likely to miss out on government aid. That’s with the initial wave, of course, because the subsequent rounds of impact from increased fuel prices is harder to estimate, Yeah said, as this would depend on the extent of cost pass-through by businesses, change in inflation expectations and the overall price environment.
Meanwhile, Centre for Market Education CEO Carmelo Ferlito suggested that one way to minimise the effects of the fuel rationalisation was to start it off as a modest experiment. “The mechanism (of the execution) is yet to be tested and may need to be fine tuned. To avoid too harsh an effect, a small-scale test should be carried out, after which it may be developed according to the operational feedback,” he explained.
He said that it makes sense that blanket subsidies be removed to depart from the dependence mentality that has been created over time and considered as a way of life. “To switch models will take time but it is unavoidable. It will not happen without disruptions and therefore the way in which the rationalisation is implemented matters a lot,” he said.
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Ni plan haosiao, subsidi kasi T1% millioair tauke transportation yg kaya supaya terus lagi kaya, jom kita bili underground subsidi minyak murah dari tangki tangki T1%
RIP. your STD spread into your brain
As above.
PH Gomen continue to troll millions of Msians
Game over for Malaysians
not game over to govt
PN 2022 PH 2024 all
do targeted subsidy
This plan is to keep the poor poorer and the rich even richer. If you guys want to know what is a kleptocratic Gomen, this is a prime example.
I like this plan
Yessss… so do we.
This is the plan hatched by the US to create a NWO wherein you, the poorer minions, will soon own nothing and you will be happy to own nothing. It’s for the top 2% to control the entire world.
You’re absolutely right
Ekonomis ni tak sampai raraf menteri ekonomi ni. Menteri lg mantap… itu pun kalu percaya
The problem is that Previous Governments & Ministers and current ones too keep on feeding us fantasy stories that 55% of the fuel subsidy all goes to T20 without providing justification.
Anyway that same guy is now the investment guy who told us APs can make Malaysia EV cars safer so just take that into context.
Tendency to lie, exaggerate, or relate incredible imaginary adventures as if they had really happened, occurring in some mental disorders
This requires brave hearted leaders to make this austerity measure, for country’s good, otherwise we are doomed to beg for IMF’s help. Way to go ahead with this!
Like I alwiz said, the real losers are B40s
biggest blunder in Malaysian history.
bursa down, inflation sky high, ringgit weakening, rising tax, and shrinking services.
This is already a precursor to a recession !! the only SEA country possibly facing one !!. and yet people are still not convinced that the majority voted wrongly. how my stomach churns in disgust.
Do u hv alternative leader or a party for your “sweet dream” all good situations? dont tell its mahiaddin or hadi awang of PN
If najib still here, many project already done. HsR, KL2, new energy company other than the monopoly TNB who hike and hike price and etc. Najib friend with China, so many project and RM not so LJ. China now dont giv a shot to us, west is fed up with us too, all mnc fly away. Daison closed fac, panasonic close factory and so on. The MY chi is just too stupid to be wave around by old fox and lucky Im a chi who not voting the last 2 time because those who bring whole family and cry to see the dream come thru gathering is now diam diam all diam diam and cucuk ownself. Just like all my family and relative now tell me to vote out this gov next round, the same bunch who voted najib out and voted the mahaidi and bla bla gov now. See how they easy to be manipulate. Shame. All neighbour is rising and MY is falling. Haihhhhhhhhhhhhh.
Would you consider Anthony Loke and DAP?
A minister who prefers to be a salesman and the opposite coin non muslim extremist version of PAS? Why? To finish off this beautiful country?
When this happens
Proves PMX project failed
Side effect of targeted subsidy
Not all commercial was covered
Government made little to no effort to increase wages from B40 to M40. but instead introduce more taxes and remove subsidies. it is not going to help the people.
Exactly, overall, it’s only benefit the govt only. Not transparency! He forgot about the manifesto and obligations.And talking about PADU. He can’t fulfil his obligations.
Everytime there is an increase, they said small increase … only 1% .. no big impact… never think everything collectively increase, what no impact? Sikit sikit jadi bukit …
There will be some ripple effect despite the fact that this shouldn’t be effecting the logistics. Our govs are reactive and not proactive – hence the entire nation suffers, ending up in damage control. well .. what to do ? suffer and get used to it.
That I’ve mentioned once the EV vehicles comes in petrol sure goes up.Clean corruption will makes lots of differences to our economy.This is the country worst enemies.
This stupid move is only going to cause even more inflation , min 10% increase in basic goods and transportation/logistics costs. Just because T20 IS ENJOYING SUBSIDY? They also paid the most tax. Useless kerajaan ubi kayu. B40 and M40 will suffer the most. B80 soon.
Yes, t20 will not be affected. Many own business and just rise the selling price and wallaaaa, the mid and bottom will pay. Gov rise 10cent they rise RM5, see, who untung. The gap is bugger now.
That’s the reason we’re T20s and not M40s or B40s. We’re shrewd businessmen. Gomen reduce subsidies of course we pass on to end consumers. You don’t expect me to stomach the high costs right? I have a family to feed too
Yes, this because of our previous generations government trying to rule the rakyat through false or untrue reality. And now, government no longer can afford. The reality will come and hit us and this time rakyat will realise that our weak ringgit exchange is bad, despite some politicians ministers say is good for our economy!
Saya ulam….
This eventually needs to happen. But it shouldn’t happen now, not when theres already high inflation and hiking cost of living with possibilities of recession. This is just going to make things harder for us, the rakyat. If you’re going to implement this, do it when our economy is extremely stabile and it wont hurt the rakyat.
My conclusion is simple, all politicians are idiots, irrespective of party or coalition.
When Najib created 1MDB he ate so much money from Malaysia, this new gh*y PM once elected so quick to introduce something similar so he can eat some money too. PADU-lah !!!
Are all fuel pumps at different petrol stations have the same operating mechanism?
Are the yellow t-Shirts people going to roll on the streets?