Higher electricity prices and vegetable costs pushed Malaysia’s headline inflation to 2.0% in May, says BNM.
KUALA LUMPUR: Higher electricity prices, resulting from a surcharge due to increased generation costs, contributed to Malaysia’s headline inflation edging up to 2.0% in May, said Bank Negara Malaysia (BNM).
In its Monthly Highlights for May 2026 released today, the central bank said headline inflation rose to 2.0% in May from 1.9% in April, while core inflation remained stable at 2.0%.
BNM said the slight increase in headline inflation largely reflected price developments of non-core items, particularly vegetables and electricity.
“The increase in electricity prices reflected the imposition of a surcharge following higher generation costs,” it said, adding that the pressures were partly offset by lower inflation for domestic air travel and retail fuel, particularly RON97 and diesel.
Meanwhile, it said credit to the private non-financial sector grew by 6.4% in May from 5.8% in April, driven mainly by businesses as reflected in higher growth in outstanding corporate bonds and outstanding business loans.
BNM said outstanding corporate bonds grew by 8.0% from 6.2% in April, while outstanding business loans increased by 7.0% from 6.2% previously.
It said business loan growth increased primarily for working capital purposes, while growth for investment-related loans remained broadly steady.
“Household loan growth was sustained at 5.5%, amid steady loan growth across most purposes,” it said.
As for the real sector, BNM said the Manufacturing Industrial Production Index registered higher growth of 8.3% in April, compared with 5.5% in March.
It said export-oriented clusters expanded by 8.5% from 6.7% previously, driven by higher production of electrical and electronics and primary-related products such as refined petroleum and chemical products.
It said growth in domestic-oriented clusters also strengthened to 8.0% from 2.8% in March, reflecting higher production of motor vehicles, food processing products and construction-related materials.
BNM said banks’ asset quality remained intact, with gross and net impaired loan ratios broadly unchanged at 1.4% and 1.0%, respectively, underpinned by stable impairments and sustained loan growth.
The banking system also maintained adequate liquidity buffers to withstand potential liquidity shocks, with an aggregate Liquidity Coverage Ratio of 149.2%, it said.
On financial markets, BNM said global market sentiment continued to be influenced by uncertainties surrounding the West Asia conflict and expectations over the US Federal Reserve’s policy rate path, although sentiment improved somewhat amid optimism over a potential resolution to the conflict during the month.
“Amid these global developments, the ringgit appreciated slightly by 0.1% against the US dollar, broadly outperforming other regional currencies,” it said.
The benchmark 10-year Malaysian Government Securities yield remained broadly stable, while the FTSE Bursa Malaysia KLCI declined 2.3% amid non-resident outflows, it added.
