‘Malaysia ben­e­fits from higher oil prices, commodity ex­ports and fis­cal rev­enue’

New Straits Times - - BUSINESS / NEWS - Za­rina Zakariah

KUALA LUMPUR: Malaysia has ben­e­fited from higher oil prices through higher commodity ex­ports, higher fis­cal rev­enue and higher commodity-re­lated in­vest­ments, ac­cord­ing to a re­port by Stan­dard Char­tered Re­search.

The coun­try’s cur­rent ac­count and growth are pos­i­tively cor­re­lated with oil prices, said the firm in a re­port ti­tled “Quan­ti­fy­ing the Im­pact of an Oil Shock”.

Higher oil prices are pos­i­tive for gov­ern­ment rev­enue.

Gov­ern­ment es­ti­mates sug­gest that every US$1 (RM3.99) per bar­rel in­crease in oil prices add about RM300 mil­lion to rev­enue.

That said, oil rev­enue is only bud­geted at 14.8 per cent of rev­enue for this year com­pared with the peak in 2009 when it con­sti­tuted some 43 per cent of to­tal fis­cal rev­enue, and there may be some up­side as the gov­ern­ment as­sumes an oil price of US$52 per bar­rel for this year.

“Hence, we es­ti­mate that for every 10 per cent rise in global oil prices, Malaysia’s cur­rent ac­count in­creases by about 0.3 per­cent­age point of gross do­mes­tic prod­uct af­ter four quar­ters.”

Malaysia is a large ex­porter of liq­ue­fied nat­u­ral gas (LNG) and palm oil. Given the pos­i­tive cor­re­la­tion be­tween oil and other en­ergy commodity prices, higher oil prices typ­i­cally sup­ported LNG and palm oil prices, the re­port noted.

The re­search firm said last year, Malaysia’s LNG and palm oil ex­ports amounted to RM80 bil­lion. The re­moval of a blan­ket oil price sub­sidy in late 2014 added to the pos­i­tive fis­cal im­pact of oil prices.

At their peak in 2012, gov­ern­ment sub­si­dies were equiv­a­lent to about RM25 bil­lion, re­duc­ing the pos­i­tive fis­cal ef­fect of high oil prices pre­vi­ously, it said.

The man­aged float sys­tem means that global oil price vari­a­tions pass through more quickly than be­fore.

On the global front, oil prices have con­tin­ued their strong run that be­gan to­wards the end of last year as the mar­ket’s mind­set and core as­sump­tions have changed sig­nif­i­cantly over the year.

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