The Malaysian government has taken the lower global oil price into account for its expected deficit this year – but will reprioritise its planned spending if the price of crude oil declines further.
“Our calculation on the impact of lower oil prices have been factored into the deficit forecast of more than 4% of GDP. This reflects the whole year’s estimated deficit based on a certain level of oil price assumption,” said the Minister of Finance Datuk Seri Tengku Zafrul Tengku Abdul Aziz in a statement. “If the oil price declines significantly below our annual average estimates, the Government will reprioritise expenditures to meet the fall in revenue.”
When the global oil price war between Saudi Arabia and Russia first started last month, MIDF Research predicted that the falling oil prices could call for a revision to Malaysia’s Budget 2020. Since then, decreased demand and resulting surplus of oil due to the Covid-19 pandemic has placed even further downward pressure on the price of the commodity.
While the Finance Minister acknowledged the general preoccupation with oil given its close link to global geopolitical influences, he also emphasised the importance of recognising that Malaysia has a diversified economic base.
“Moving forward, MOF will also be looking at structural reforms to ensure better diversification in Malaysia’s economy, apart from undertaking the necessary fiscal and monetary policies to develop the nation’s economic resiliency,” said Tengku Zafrul.
(Source: The Malay Mail)
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