ALTHOUGH Malaysia saw a limited direct impact from the Russia-Ukraine conflict, it experienced spillover effects, particularly steep price increases for food and fuel.
On a global scale, the growth of the global economy is projected to decline by 3.2% and 2.9% in 2022 and 2023 respectively.
This was on the back of increases in raw material prices, freight charges, labour costs, food items, fuel and transportation due to the conflict.Russia is the world’s largest global exporter of wheat, natural gas, palladium, nickel and fertilisers. It also has significant contributions in global coal and crude oil exports.
Meanwhile, Ukraine is the world’s biggest exporter of seed oil and the fourth largest for corn, in addition to producing up to 50% of global neon gas critical for chip making.
Hence, the conflict brought about global supply chain disruptions that led to the rise in commodity prices.
For Malaysia, chicken prices went up due to the hike in chicken feed prices as it is made from corn, soybeans and palm oil. In producing animal feed including poultry, corn and wheat are the main ingredients.This in turn led to a rise in the inflation rate for households. The price of a standard processed chicken increased by 17.19%, from RM8.55 per kilo in June 2021 to RM10.02 per kilo in June 2022. Moreover, the price of a chicken egg ranges from 40 sen to 45 sen.
In a bid to counter inflation, a new ceiling retail price for standard process chicken was set by the government at RM9.40 per kilo.
The new ceiling price for chicken eggs was set at 45 sen (grade A), 43 sen (grade B) and 41 sen (grade C) effective July 1, 2022.
Other than the poultry price hike, fuel prices also went up. There was a surge in global crude oil and coal prices due to disruptions in Russian oil and gas supply.
The price of Brent crude oil per barrel increased by 18.24%, from US$91.31 (RM422.77) in early February this year to US$107.97 (RM499.90) at the end of July.
As a result, RON97 petrol saw a 37.8% increase, from RM3.12 per litre in early February this year to RM4.30 per litre at the end of August.However, the subsidised fuel price is maintained at RM2.05 per litre for RON95 petrol and RM2.15 per litre for diesel.
Overall, the consumer price index increased by 2.8% in the first seven months of 2022, compared with the same period in 2021 by 2.3%.The category of food and non-alcoholic beverages recorded rise of 4.8% including the price of meat at 9.1%; milk, cheese and eggs at 7%; and vegetables at 6%. This remains the main catalyst for the rise in the inflation rate, with the average at 2% from 2021 to July 2022.To control the rise in the price of goods more effectively, the government established the Pasukan Khas Jihad Tangani Inflasi (Special Jihad Task Force Against Inflation).
Bank Negara’s Monetary Policy Committee also implemented three 25 basis point hikes in the overnight policy rate (OPR) in May, July and September this year to control inflation caused by the depreciation of the ringgit. The OPR is now at 2.5%.