KUALA LUMPUR, Jan 22 — Malaysia's reliance on oil revenue leaves the nation vulnerable to global commodity markets, observed Standard Chartered Asean and South Asia Chief Economist Edward Lee.
The risk stems from the fact that the 2019 Budget is based off the government's estimate that the oil price will hover around US$60 (RM248.11) to US$70 per barrel.
"The price of Brent crude oil has plummeted by 30 per cent to US$60 in the span of two months from October to November last year. The risk is if the prices average significantly below the government's 2019 estimate of US$60 to US$70 per barrel.
"Providing comfort is the fact that the government plans for non-petroleum revenue to remain its largest revenue in the medium term," said Lee.
He also predicted that the oil revenue will rise to around 19 per cent of the total fiscal revenue in 2019 when compared to the 15 per cent in 2018.
However, he pointed out that Malaysia needs additional revenue sources to reduce its deficit over the next few years.
"We expect the fiscal deficit to narrow marginally to 3.4 per cent of the GDP in 2019 from 3.7 per cent in 2018," he said.
When asked what sort of policies the nation can do to restore the fiscal situation, Lee said currently there are no easy way out as the sales of government assets and the RM30 billion special Petronas dividend is only a one-off thing.
"On revenue side, maybe SST is a bit broader than before and assumption on SST collection at RM20 billion, there could probably some upside surprise to budget. Otherwise revenue efficiency, I don't think there's a lot of low hanging fruits otherwise that can sort it faster.
"I think mixture of combination but I don't see silver bullet at the moment for sustainable measures like this," he said, referring to the Sales and Services Tax.
