Lower oil prices factored in GDP forecast, says finance ministry

Finance Minister Tengku Zafrul Aziz says the government will look at structural reforms to ensure better diversification of the economy. (Bernama pic)

PETALING JAYA: The finance ministry said it had factored in the impact of the lower oil prices when it forecasted a deficit of more than 4% in the country’s gross domestic product (GDP).

The minister, Tengku Zafrul Aziz, said this reflected the entire year’s estimated deficit based on a certain level of oil price assumption.

“If the oil price declines significantly below our annual average estimates, the government will reprioritise expenditures to meet the fall in revenue,” he said in a statement.

On Monday, US crude fell more than 8% to below US$17 a barrel.

Oil markets have dived to near two-decade lows in recent weeks as lockdowns and travel restrictions around the globe affect demand for the commodity.

The crisis was aggravated after Saudi Arabia launched a price war with Russia.

Tengku Zafrul, however, said it was important to recognise that Malaysia has a diversified economic base.

“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,” he said.

Earlier this month, Tengku Zafrul said the nation’s 2020 budget deficit will rise to 4.7% after unveiling an additional stimulus of RM10 billion to cushion the impact of the Covid-19 pandemic on the economy. - FMT