Malaysia well-positioned to weather Middle East war, says report

 Maybank Investment Bank notes that Malaysia is Asean’s sole net energy exporter.

Iran closed the Strait of Hormuz following the US-Israel strikes earlier this month, leading to crude oil surging to around US$100 per barrel. (EPA Images pic)

PETALING JAYA:

 Malaysia’s status as a net energy exporter gives it an advantage in weathering the economic fallout from the Middle East war compared to other regional economies, according to Maybank Investment Bank (Maybank IB).

Tensions escalated after Iran closed the Strait of Hormuz following the US-Israel strikes earlier this month, causing crude oil prices to surge to more than US$100 per barrel.

In a research note, the bank highlighted that Malaysia, Asean’s only net energy exporter, is in a stronger position than its Asean neighbours due to its “robust” energy reserves.

“Malaysia’s energy exports may benefit from higher prices as a net oil and gas exporter in the region,” it said.

“Malaysia’s trade surplus in gas offsets the trade deficits in crude oil and petroleum products.”

The report also noted that Malaysia’s palm oil and aluminium producers could benefit from higher commodity prices.

GDP and inflation forecasts

Maybank IB also revised its GDP growth forecasts for Asean economies in 2026, assuming that oil prices ease and a ceasefire is declared by the second quarter of the year.

• Malaysia: 2026 GDP forecast lowered by 0.2 points to 4.9% (previously 5.1%).
• Indonesia: lowered 0.2 points to 5.0%.
• Singapore: lowered 0.2 points to 3.4%.
• Thailand: lowered 0.3 points to 1.8%.
• Philippines: lowered 0.4 points to 4.5%.
• Vietnam: lowered 0.4 points to 7.2%.
• Inflation forecasts were also revised:

• Malaysia: 1.8% (up 0.1 points from 1.7%).
• Philippines: 3.3% (up 0.5 points).
• Indonesia: 3.0% (up 0.5 points).
• Thailand: 0.8% (up 0.8 points).

Supply risks

The report said Malaysia is among the three Asean countries most exposed to supply risks from the Middle East conflict due to its dependence on crude oil from the Persian Gulf.

Maybank IB said the Philippines’s exposure stands at 95%, followed by Vietnam (88%), Malaysia (69%), Thailand (59%), and Singapore (52%). Indonesia has a more diversified import profile, sourcing only 20% of its crude from Gulf countries.

The bank added that the region’s reliance on external energy sources highlights its vulnerability to supply shocks, especially if major producers or refiners impose export restrictions to safeguard domestic needs.

Fuel prices and subsidies

The government recently raised the price of RON97 petrol by RM1.30 and diesel in West Malaysia by RM1.60. Non-subsidised RON95 has increased by 60 sen.

Putrajaya estimates that maintaining subsidised fuel prices would raise the monthly subsidy bill from RM700 million to RM3.2 billion, comprising RM2 billion for RON95 and RM1.2 billion for diesel. Diesel remains subsidised in East Malaysia.

Maybank IB estimated that every US$10 per barrel increase in the annual average crude oil price could raise the government’s RON95 subsidy by around RM1.5 billion to RM2 billion.

Current fuel subsidy allocations are based on an assumed crude price of US$60-65 per barrel.

“For Malaysia, fiscal reforms in previous years have afforded the government space to absorb the rising cost of subsidising fuel,” the report said. - FMT