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.