Opec out­put cut plan ‘ pos­i­tive for Malaysia’

> May not boost prices much but will help brighten eco­nomic prospects of oil ex­porters: World Bank


KUALA LUMPUR: While the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries' (Opec) de­ci­sion to cut oil pro­duc­tion is not ex­pected to lift prices sig­nif­i­cantly, it will help boost Malaysia’s eco­nomic growth, ac­cord­ing to World Bank chief econ­o­mist for East Asia and the Pa­cific, Sud­hir Shetty ( pix).

“It won't have much im­pact on the tra­jec­tory of oil prices, but we see it will rise grad­u­ally mov­ing into 2017 and 2018," he told a tele­con­fer­ence on the East Asia and Pa­cific Eco­nomic Up­date here yes­ter­day.

“You al­ready be­gin to see that trend in the oil mar­ket, un­der­pin­ning bright prospects for oil ex­porters like Malaysia. That’s why our pro­jec­tions are higher for 2017 and 2018,” he said.

Sud­hir said while Malaysia could ben­e­fit from the planned pro­duc­tion slash by Opec, there is still a lot of sup­ply from non-Opec coun­tries, hence the abil­ity of the car­tel to in­flu­ence oil prices is ex­pected to be lower.

On Malaysia's eco­nomic prospects, he be­lieves gross do­mes­tic prod­uct (GDP) growth will im­prove in 2017 and 2018 to 4.3% and 4.5% re­spec­tively af­ter an ex­pected mod­er­ate growth of 4.2% in 2016 due to low com­mod­ity prices and slow­ing man­u­fac­tur­ing ex­ports.

“For 2017 and 2018, we see faster trade growth in man­u­fac­tur­ing and re­cov­ery in com­mod­ity prices, this will un­der­pin the growth in Malaysia,” Sud­hir noted.

Nonethe­less, he doesn’t fore­see a huge pick-up in agri­cul­tural com­mod­ity prices in the next one to two years.

“There will be a slight in­crease, but it will still be lower than the level in 2014,” he opined.

In the eco­nomic up­date re­port, the World Bank said, go­ing for­ward, the Malaysian econ­omy faces risks em­a­nat­ing from ex­ter­nal de­vel­op­ments, in­clud­ing un­cer­tainty over global growth and po­ten­tial volatil­ity in fi­nan­cial mar­kets.

“Fur­ther­more, lin­ger­ing pub­lic dis­course sur­round­ing 1Malaysia De­vel­op­ment Bhd (1MDB) could im­pact in­vestors’ sen­ti­ments and di­vert the govern­ment’s fo­cus from needed re­forms,” it noted.

The re­port also high­lighted Malaysia's main chal­lenge and op­por­tu­nity go­ing for­ward lies in ac­cel­er­at­ing struc­tural re­forms for the tran­si­tion into a high-in­come econ­omy, with a fo­cus on hu­man cap­i­tal de­vel­op­ment, lib­er­al­i­sa­tion and fur­ther com­pe­ti­tion in the econ­omy. “Malaysia has em­barked on a wave of ‘new gen­er­a­tion’ trade agree­ments and the im­ple­men­ta­tion of these trade agree­ments could open the door for mov­ing for­ward on some of these ar­eas,” it added. On a sep­a­rate note, Sud­hir said Brexit has lit­tle im­pact on the re­gional econ­omy as the ex­po­sure to the UK is not sig­nif­i­cant. “Hav­ing said that, we are cau­tioned that it is only pre­lim­i­nary anal­y­sis be­cause we don’t know the full im­pact of Brexit un­til it hap­pens,” he ex­plained. Com­ment­ing on the geopo­lit­i­cal risks within the re­gion such as the ten­sion sur­round­ing the South China Sea, Sud­hir opined that it won’t pose a sig­nif­i­cant im­pact to the re­gional econ­omy. “Un­less some­thing dramatic hap­pens in the South China Sea, it will not af­fect the re­gion,” he said.

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