‘Let market forces decide’

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Most economists view price controls as a short-term measure while allowing market forces to come into play a more realistic step.

Most economists viewed price controls as a short-term measure but allowing market forces to come into play is a more realistic way of ensuring stability in food prices.

Eventually, he said the government should remove price controls to allow prices to adjust to the market so that suppliers would produce more and prices could moderate. To ensure that food is affordable, the government should look at ways to support the income of those affected instead of imposing price controls.

The expected easing of food prices this year is in line with the downtrend of inflation globally and domestically. On the other hand, core inflation remained persistent at 4.1% y-o-y in the final month of 2022, barely moving from the 4.2% recorded in November. Ernst & Young Consulting Sdn Bhd partner Mohd Husin Mohd Nor said food inflation could potentially remain high, if the country continues to depend on imported food, fertilisers and animal feed as local producers struggle to meet demands.

“In the long run, it would be unprofitable for farmers to continue their operations. If price ceilings are removed, market demand will determine the price.“Food prices will normalise when supply surges to meet demand. “The longer they last, the more painful the adjustment process will be. Let’s not forget that inflation was created by the government with the lockdowns and the ensuing expansive policies.

“There is only so much we can do apart from the two policies. To be clear, the government was able to offer higher subsidies to the rakyat due to the high global oil prices. Firdaos, who is closely monitoring fuel price movements to ascertain the inflation trend this year, said he is pencilling in a 3% inflation rate y-o-y for 2023.

Fuel prices would be largely determined by global energy markets and the pace of subsidy rationalisation that the government is expected to implement this year, he noted.

 

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