PETALING JAYA: While Russia’s invasion of Ukraine carries huge risks to global economic recovery, it is giving Malaysia a shot in the arm.
Escalating fuel prices due to the war will boost the nation’s coffers as Malaysia is a net exporter of oil, said Sunway University Economics Prof Dr Yeah Kim Leng.
“We must be careful as to how we use this windfall. The government needs to use part of it for subsidies to protect the public from high prices,” he told theSun.
“Part of the money must be used to help the economy recover after being hit very hard by the Covid-19 pandemic.”
Yeah pointed out the need to allocate part of the money from this short-term gain for development expenditure to combat the economic impact of Covid-19, adding that it would help the government to cover the fiscal hole created by the pandemic.
He cautioned that there is a need to guard against further increase in oil and gas prices if the conflict in Europe continues for a long time, while pointing out that Europe depends hugely on Russia and a prolonged conflict could impact commodity prices.
Yeah said there could also be financial shock as financial institutions become risk-averse, thus impacting the economy.
“Malaysia is lucky it is relatively shielded from any major impact on commodity prices. We rely on the Asean region, Australia, China and partially on the United Kingdom to meet our commodity needs.
“As the country also relies on oil imports from the Middle East, there could be some impact if oil is diverted to meet Europe’s needs.”
Yeah also pointed out that any food or commodity production shortfall in Europe due to a lack of energy would not have a major impact on Malaysia. However, he said there might be some rise in prices due to the European shortfall.
Another economist, Dr K. Kuperan Visvanathan, said the conflict in Europe would not have much of an impact here as Malaysia does not rely heavily on Europe.
As a net exporter of oil, the current higher prices bring Malaysia greater benefits, said the professor of Resource and Environmental Economics at Universiti Utara Malaysia.
“If oil prices continue to rise, Malaysia will benefit hugely from it. The money could be used to boost the economy.
“Prices of goods will go up. Therefore, the government will need to use part of the windfall for subsidies,” he said.
He added that food prices are bound to go up in tandem with transport charges due to higher oil prices.
Kuperan also said that there would be a greater impact on our country if anything happens to China.
He said since most of the country’s imports involving commodities come from Asean, China, Australia and United Kingdom, this partially shields Malaysia from higher prices because of the war in Europe.
He added that the high price of oil is a blessing as well as a curse as the money will have to be used to subsidise the higher cost of food.
Bangi MP Dr Ong Kian Ming said in a statement yesterday that the war in Europe will drive up oil prices, that must be subsidised by the Finance Ministry.
He said upward pressure on animal feed would indirectly cause higher prices of food and other items.
“The longer the war continues, the greater the likelihood of imported inflation putting pressure on goods and services in Malaysia, thus hitting at the pockets of the average Malaysian.
“The cost of spare parts, building materials, machine and machine parts used in food production will go up,” he said.
Ong also warned that a disruption to the global supply chain will affect local companies and multi-national corporations operating here.
