Inflation, economic growth forecasts not affected by targeted subsidy implementation - MoF

KUALA LUMPUR: The implementation of targeted diesel subsidies is not expected to have a significant impact on inflation and economic growth, as the government has taken into account the rate of increase in diesel retail price and the cash assistance provided, the Finance Ministry (MoF) said.

Therefore, the official 2024 forecasts for inflation and gross domestic product (GDP) growth remain at 2.0-3.5 per cent and 4.0-5.0 per cent, respectively, the ministry said.

"In principle, the government takes the approach of subsidy rationalisation while continuing to provide subsidies to groups that are in need, especially those with low to medium incomes," MoF said in a written reply on the Parliament website.

It was responding to a query from Datuk Seri S. Vell Paari, who wanted to know problems that may arise from the implementation of targeted diesel subsidies, how to avoid burdening the people, and whether the government plans targeted subsidies for RON95.

MoF explained that the retargeting of subsidies is intended to reduce leakages to groups that are not eligible to receive them such as foreign citizens, large private companies and high-income individuals.

Under the diesel subsidy retargeting, cash assistance to vehicle owners is only given to 300,000 individuals with assistance provided based on a single rate of RM200 per month, which is estimated to be sufficient for individual owners of diesel vehicles who mainly use pickup trucks.

"In contrast, the number of RON95 petrol consumers is far larger, including owners of motorcycles and cars as well as e-hailing drivers. Therefore, if cash assistance is used as the RON95 approach, it may differ from diesel," MoF said.

-- BERNAMA