The latest analysis shows that the government has strong justification for not implementing a blanket price increase for the RON95 BUDI MADANI (BUDI95) subsidy at this time. This is driven by the significant downward trend in global crude oil prices.
In addition, the stability of oil refining margins, or ‘crack spread’, also plays an important role in easing fuel cost pressures in the domestic market.
These market developments provide the necessary fiscal space for the government to maintain the current price of BUDI95 at RM1.99 per liter.
This action allows the government to avoid any sudden increase that could have a direct impact on the cost of living of the people and indirectly, the country’s inflation rate.
CIMB Treasury and Markets Research is of the view that, based on the downward trend in global crude oil prices and the stable price spread, it does not expect any blanket increase in the BUDI95 subsidy price in an effort to achieve its inflation forecast.
In fact, the firm’s current estimate shows that the monthly fuel subsidy bill is expected to shrink to below RM5 billion from June.
If the Government were to further reduce subsidy spending, a more likely step would be to adjust the BUDI95 quota ceiling limit, which is currently set at 200 litres per month.
According to the analyst, “Adjusting the BUDI95 quota ceiling is likely to be the preferred factor if the government is looking at additional savings, rather than changes to prices or eligibility,” he explained.
Overall, CIMB Treasury and Markets Research expects the direct impact of fuel inflation to remain contained in the coming months. Data shows headline inflation rising to 1.9 per cent in April 2026, while core inflation recorded a marginal decline to 2.0 per cent.
The increase in headline inflation was mainly driven by rising transport costs, the component of which increased to 4.1 per cent following the adjustment of unsubsidised petrol and diesel prices.
Looking ahead, CIMB Treasury and Markets Research expects headline inflation to remain in the range of 1.9 percent to 2.1 percent in May 2026. Core inflation is forecast to be stable at 2.0 percent, driven by evidence of broader second-round inflationary effects that remain subdued.
Food inflation is expected to exceed 1.5 percent. However, this increase is likely to be offset by a slightly smaller contribution from fuel and gold due to lower price levels compared to April 2026.
Meanwhile, electricity inflation is expected to increase slightly to -3.5 percent year-on-year, compared to -5.1 percent in April. This increase is due to the increase in the automatic fuel adjustment (Imbalance Cost Pass-Through, ICPT) for electricity tariffs in the Peninsular.
