Falling oil prices pose challenge for Malaysia, says WSJ

Declining global oil prices could cause Malaysia’s oil-related revenue to drop from 5.9 per cent of the GDP in 2014 to 3.1 per cent of the GDP this year. — File pic
Declining global oil prices could cause Malaysia’s oil-related revenue to drop from 5.9 per cent of the GDP in 2014 to 3.1 per cent of the GDP this year. — File pic

KUALA LUMPUR, Jan 6 — Declining global oil prices could cause Malaysia’s oil-related revenue to drop from 5.9 per cent of the GDP in 2014 to 3.1 per cent of the GDP this year, an economist has said.

US paper the Wall Street Journal (WSJ) reported Sunday Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch, as saying that the Asia-Pacific countries that would not benefit from the lowest oil prices in more than five years were oil exporters like Malaysia, Asia’s biggest oil exporter, Brunei, Myanmar and Australia.

Most other Asian countries that depend on oil imports, however, would stand to gain from cheaper oil like Indonesia, India, China, Thailand, the Philippines, Taiwan and South Korea, the newspaper said.

Malaysia’s oil-related revenue totalled RM63 billion in 2013, accounting for 29.5 per cent of total government revenue.

Reuters reported state oil company Petronas as saying early December that its various payments to the government in the form of tax, royalties and dividends could drop by 37 per cent this year if oil stayed at around US$75 (RM256.88) a barrel.

Media reports have revealed declines in the ringgit, local stock market, and net worth of industry players including billionaires Tan Sri Robert Kuok and T. Ananda Krishnan, and even Tan Sri Mokhzani Mahathir, in the aftermath of the global oil slump.

Reuters reported second finance minister Datuk Seri Ahmad Husni Hanadzlah as saying last month, however, that Putrajaya would not budge from its aim of reducing the country’s budget deficit to 3 per cent of the GDP this year despite depressed oil prices.

But economists reportedly said the 2015 deficit target was at risk due to tumbling oil prices, with HSBC saying that government revenues could be reduced by RM7.4 billion and the budget deficit hitting 3.6 per cent of the GDP.