Falling oil prices results in bag of mixed reactions

MIER says falling crude oil prices are affecting the country’s economic outlook both negatively and positively.

PETALING JAYA: The Malaysian economic outlook will likely be mixed due to the fall in the crude oil prices, said the Malaysian Institute of Economic Research (MIER).

The think tank’s Executive Director Professor Emeritus Dr Zakariah Abdul Rashid said as Malaysia relies quite significantly on the oil and gas industry, the impact on the country will be both positive and negative.

“We are a net exporter of crude oil and gas and at the same time a net importer of petroleum products, so we will see from these two (upstream and downstream of the oil and gas industry) that the impact on the economy will be rather mixed: positive and negative,” he told reporters on the sidelines of the National Economic Outlook Conference (NEOC) today.

The price of Brent crude oil has fallen to a five-year low of US$70 per barrel following the Organisation of the Petroleum Exporting Countries’ decision to maintain its production ceiling.

Zakariah said lower crude oil prices will reduce transportation costs and thus production cost, which will be good for consumers as they can enjoy higher incomes.

“But since Malaysia is an exporter of oil and gas, it will affect our aggregate demand and slightly trim our national revenue,” he said.

However, he said, the government’s reduced dependence on oil and gas revenue to about 30 per cent currently is a positive sign.

“And with the implementation of the Goods and Services Tax in April 2015, the federal government’s revenue from sources of tax will improve,” he added.

- BERNAMA