RAM Ratings expects the inflation rate to come in at 0.3% in April (March: 0.2%). The uptick is underpinned by slightly greater inflationary pressure from the food and transport components. The former is mainly driven by low-base effects from the previous year while the latter is attributable to the higher average price of RON97 petrol, which is consistent with the uptrend in Brent crude prices.

Uncertainty over the trajectory of global oil prices will remain the greatest upside risk to our forecast this year, amid lingering geopolitical concerns that affect supply conditions. Besides, the eventual mechanism (cash transfer vs fleet card) for targeted fuel subsidies, which is still not announced, will also affect our headline inflation projections. RAM’s current forecast of 1.6% incorporates the cash transfer mode, with everyone paying the same price at the pump. This will push headline inflation slightly higher relative to the other mechanism, which aims to use a meansbased system to target different types of users.

Ms Kristina Fong, Head of Research

“Headline inflation trends this year will be underscored by policy changes. The one with the most significant bearing will be the intended change to a targeted fuel subsidy system in the second half. Our estimates show that this change could contribute 0.4 percentage points to headline inflation this year,” highlights Kristina Fong, RAM’s head of research.