KUALA LUMPUR, April 14 — Malaysia’s economic growth will be hurt by low global oil prices that are set to benefit to regional competitors, according to a recent report by the World Bank.

Already facing “headwinds” from the global economy, Malaysia’s status as a net oil exporter means that it will suffer from the depressed price of the commodity that will provide a boost to countries such as Cambodia, Laos, the Philippines, Thailand and others.

This was in addition to the lower growth prospects for the region, which the World Bank adjusted downwards from an average of 6.9 per cent last year to 6.7 per cent for 2015 and 2016.

“East Asia Pacific has thrived despite an unsteady global recovery from the financial crisis, but many risks remain for the region, both in the short and long run,” said Sudhir Shetty, Chief Economist of the World Bank’s East Asia and Pacific Region.

“To address these risks, improving fiscal policy is key. With low oil prices, countries — whether oil importers or exporters — should reform energy pricing to usher in fiscal policies that are more sustainable and equitable.”

Oil prices that fell over 60 per cent in the latter half of 2014 has hit Malaysia hard due to its heavy dependence on oil revenue; petroleum-derived income contributed a total of RM63 billion to its coffers in 2013, accounting for 29.5 per cent of total government income.

According to Shetty, Malaysia must further dismantle its energy subsidies despite acknowledging the country’s move to abolish direct price support for all grades of petrol and diesel to consumers last year.

The economist added that the revamp of energy subsidies must be maintained even when oil price eventually recovers.

The World Bank has already cut Malaysia’s growth forecast for 2015 from 4.9 per cent to 4.7 per cent due to the drop in oil price.

Putrajaya removed direct fuel subsidies to consumers but maintains subsidies for other sectors, primarily in power generation either directly through price control on natural gas or payments to independent power producers.

In January, the Najib administration announced a revision to its Budget for 2015 in response to plunging oil prices — global crude oil prices had then dipped to less than half of the federal government’s estimated average of US$110 (RM396) per barrel for 2015.

Prime Minister Datuk Seri Najib Razak also announced a RM5.5-billion cut in Putrajaya’s operating expenditure this year and adjusted the deficit reduction target to 3.2 per cent of the national economy instead of the original 3 per cent, while maintaining the RM48.5 billion development budget.

He also reduced the growth forecast for the country’s gross domestic product for 2015 to between 4.5 and 5.5 per cent, from the previous target of 5.0 to 6.0 per cent.