Oil price recovery fires hope for Malaysian economy

Oil price recovery fires hope for Malaysian economy
The recovery in oil prices will be a net plus for Malaysia. The plus might be less than before
KUALA LUMPUR: The recovery of global oil prices is expected to benefit Malaysian economy as it will lead to domino effect across other sectors and commodities.

According to OCBC Bank, the recovery of oil prices will also be the catalyst for Malaysian export dan supporting the ringgit value.

OCBC Economist Wellian Wiranto said the oil price would hover around US$D65 per barrel by the end of 2017, subsequently contributing positively to national coffers.

“The recovery of oil prices will be a net plus for Malaysia. The plus point might be lesser than before due to the fiscal side,  during the downturn of the oil price, the government did a wise thing to decoupled Malaysia’s fiscal budget from oil price.
“If you reduce the contribution, you also reduce the oil subsidy. So, the dependence on oil of the fiscal budget will be decreased.” he said after presenting 2017 economic forecast for Malaysia here today.

Meanwhile, Malaysian export is also expected to recover propelled by the recovery in the demand from import countries like China.

“Commodity export form a bulk of the recovery, we believe the oil price would recover to USD65 per barrel by end of this year supported by the supply cut by the OPEC and Non OPEC countries. This will help other commodities as well. “ he said.

Commenting on U.S President Donald Trump’s policies, he said no concrete measures taken by his administration apart from pulling out from TPPA and NAFTA.

“Malaysian export to the US is around 7 percent and definitely Malaysia will get hit (on new trade policies)
“compare that to some other countries in the region, not as badly hit. Vietnam has export to the US 14 percent of GDP.

“Being an export dependent country, Malaysia’s economy will get hit but comparatively not as bad.” He said.

In the forecast report, OCBC predicts 2017 economy would be around 4.2 per cent boost by domestic consumption.

He was also confident that Bank Negara Malaysia will not revise the Overnight Policy Rate (OPR) this year as it will lead negative impact on the economy and higher household debts.