Malaysia is Asia's largest oil-and-gas exporter, hence falling prices will have a long term impact on the economy, according to the Wall Street Journal. - Pic courtesy of The Edge, November 18, 2014.The negative effects of plummeting oil commodity prices has had a severe impact on Malaysia's growth prospects and government revenues, the Wall Street Journal reported today.
The heavy reliance on the export of oil, palm oil and rubber for the nation's revenue means that the decline in global prices for these commodities will hit us the hardest.
In contrast, WSJ said that other Asian economies, which are commodity importers, are set to benefit from the drop in price.
Calling Malaysia Asia’s largest oil-and-gas exporter, the US business daily said the country benefited when the price of crude oil remained over US$100 a barrel for most of last year.
Hence, the sharp decline in the oil price to US$80, and the expected further drop in price, has resulted in foreign investors withdrawing around US$2.5 billion from the country last month, WSJ quoted analysts as saying.
Malaysia's current account surplus stands at RM7.6 billion in the third quarter of this year compared with RM16 billion for the same period a year ago.
The country's oil-related revenue amounted to RM63 billion last year, which is equivalent to almost 30% of the total government revenue.
According to the WSJ, the county's woes are further compounded due to the decline in the price of rubber and palm oil – two other major exports – to new lows.
Malaysia remains the world’s second-largest producer of rubber and palm oils, making the 25% and 16% drop in both commodities, respectively, having a severe impact on revenue.
Meanwhile, domestic consumer spending by Malaysians has also slowed under an accumulated household debt that is 86% of the economy.
The WSJ reports that the pressure from falling commodity prices on the economy will be an obstacle to the vision of turning Malaysia into a high-income country with developed nation status by 2020.
This is because Malaysia’s economy expanded at the slowest rate in the third quarter, growing by only 5.6%, falling short of the 6.5% projected in the previous quarter.
The country needs to maintain an annual GDP growth of 6% until 2020, but economists are pessimistic this is possible with the looming uncertainties from falling commodity prices.
This has in turn also resulted in the ringgit dropping to a four-year low against the US dollar, the WSJ reported. – November 18, 2014.
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We dont have to agree on what foreign paper is saying about our economy:
1.if oil above 80 is Buy call and oil below 80 is a sell call on our economy then how many in a year that we have to Buy and Sell.
It is Not a good reason to be Panic.
2.While oil and gas sector are hurting, lots of local industry and consumers are also benefiting from lower oil price as well. Overall net effect might not be so Bad.
Who is Happy with high oil price anyway?
3.anyway the price drops is Due to perceived Big supply coming on stream which might not be the case.
As long as the Demand is not declining, the price drops might be temporary. At current price, supply has to be slow.
Overall oil price is hardly an Economy Indicator.
4. look at ten years chart of Oil price, it has been below 100 below 80 most of the time for past ten years.
Business just needs to have its own adjustments. It is Not like we cannot be flexible, right?
5. The result is Slow Growth which is Not the End of the World and Disaster.
Well the fact now is a margin squeezed at the moments. No more No less. Dont blow the situation Out of Proportion.
2014-11-22 02:57