Decision not to hike toll rates will ease inflationary pressure, say economists

Published: Friday February 7, 2014 MYT 12:00:00 AM 

Updated: Friday February 7, 2014 MYT 8:12:12 AM

BY INTAN FARHANA ZAINUL AND TASHNY SUKUMARAN

PETALING JAYA: The Government’s decision not to raise toll rates will ease inflationary pressure, said econo­mists, as the cost of goods and ser­vices has been affected by the price hikes of fuel, sugar and electricity.

CIMB economics research head Lee Heng Guie said the Government’s priority was to ensure that there wasn’t another round of price hikes and manage the strong inflation pressure from the previous hikes.

“To increase toll rates could set off another round of increases which may set off higher inflation,” he said, adding that the RM400mil used to pay off toll concessionaires would not impact the Government as it was a smaller amount compared to the billions saved from reducing subsidies.

He said the previous Budget had accounted for the possibility of havin­g to cushion toll hikes.

This was echoed by Nor Zahidi Alias of the Malaysian Rating Corporation Bhd, who said the Government wanted to insulate consumers from the multiple effects of price increases.

“The increases have led to a jump in consumer prices as reflected in the Consumer Price Index (CPI) growth of more than 3% in December 2013. If toll hikes are implemented, inflation will accelerate further and the burden on consumers will be further magnified, especially when jitters about the implementation of GST start to surface,” he said.

RAM Holdings group chief economist Dr Yeah Kim Leng said that with the toll hike off the table, inflationary pressure would be reduced.

“Toll rates have a major knock-on effect on the cost of doing business,” he said.

Yeah added that he expected the Government to achieve its fiscal deficit goal of 3.5% of the gross domestic product (GDP) this year.

Alliance Research chief economist Manokaran Mottain said the Govern­ment’s move of not increasing toll rates spaced out its austerity schemes and softened the blow on consumers.

On Wednesday, the Government decided to postpone the move to increase the toll rates of 15 major highways, and will instead pay RM400mil in compensation to the toll concessionaires to help cushion the public from the rising cost of living.

The announcement of a possible toll hike came amid a slew of subsidy rationalisations as part of measures to rein in fiscal deficit.

Accumulated debt is also high at 54.8% of the country’s gross domestic product (GDP), which is only slightly below the self-imposed limit of 55% of GDP.