KUALA LUMPUR: Oil prices may be on a protracted slump but Malaysia is not facing an economic crisis, stressed Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar yesterday.
“We are not in a crisis ...there was a time when oil revenue was more than 40% of government revenue, but we have consistently brought it down to below 30% for 2014,” he told reporters after the 2014 economic wrap-up briefing that was organised by the Performance Management and Delivery Unit (Pemandu).
He was responding to questions on whether the country was going to face a financial crisis this year after oil prices had fallen by about 50% from June last year on concerns of oversupply.
Wahid explained that Malaysia’s broad-based and diversified economy will enable it to withstand any global economic shocks.
He said that it was only natural that the country’s gross domestic product (GDP) for 2015 will be affected by the lower oil prices, but insisted that the GDP forecast of 4.5% to 5% for this year can still be achieved.
Meanwhile, Pemandu in a statement earlier said strengthening fundamentals over the last five years has placed Malaysia on a firm footing to achieve continued growth in 2015, despite unstable external economic conditions.
This was on the back of private investments that grew at 11% for 2014, reduced dependence on oil revenue to 29.7%, and exports, which went up 6.4% during the period, it added.
Pemandu said economic growth in 2014 was led by private sector activities across all major industries including services, manufacturing, construction and mining.
“As evidenced, we’re seeing a significant shift from dependence on oil revenue with the reduction from 35.4% of total government revenue in 2010 to 29.7%, as estimated by the EPU (economic planning unit), in 2014,” said Pemandu’s chief executive officer Datuk Seri Idris Jala.
The approach of the Economic Transformation Programme (ETP) in driving the top 12 economic sectors and institutionalising various policy reforms to create competitive and level playing fields has led to a more robust and diversified economy, said Idris, who is also a Minister in the Prime Minister’s Department.
This also mitigated the risk of being overly dependent on oil and gas revenue, he added.
Earlier this year, Pemandu said concerns were raised on whether the Malaysian economy would face a crisis following the sudden free fall of global crude oil prices at the tail end of 2014, potentially reducing the nation’s income and affecting sections of the economy.
In this regard, it said the continued surplus in the current account, together with Malaysia’s strong and well-capitalised banking system and developed financial markets, which have provided additional support to strengthening the country’s economic condition, has provided for economic strength that helps buffer Malaysia against external shocks.
In 2014, Malaysia’s current account registered a higher balance of RM49.5 billion or 4.8 % of gross national income (GNI) compared with 2013’s RM39.9 billion or 4.2 % of GNI, it noted.
With solid fundamentals and pragmatic policies, Idris said Pemandu is confident that the country is on track to becoming a high-income nation by 2020.
Idris, who had previously turned around Shell MDS (M) Sdn Bhd and Malaysian Airline System Bhd, was handpicked by Prime Minister Datuk Seri Najib Razak to run the ETP and the Government Transformation Programme in 2010.
This article first appeared in The Edge Financial Daily, on February 27, 2015.