KUCHING: An oil-price spike can still hit Malaysia through higher import bills and rising business costs.
Sunway University Business School Professor of Economics Dr Yeah Kim Leng said while Malaysians may be shielded from the immediate effects of oil price shocks through government fuel subsidies, higher world energy prices will result in higher cost of production.
“It will ignite another round of global inflation just when price levels are stabilising across the world.
“Imports will be more expensive and this will eventually have knock-on effects on inflation in Malaysia, with the speed of transmission depending on the magnitude and duration of the oil price surge,” he told Sarawak Tribune.
In a risk-off environment caused by geopolitical uncertainty, he said investors will put on hold investment decisions or shift to safer assets, resulting in financial market declines and increased market volatility.
“Consumers and businesses will turn more cautious, resulting in a slowdown in consumption and fixed investment.”
On indicators, Yeah said a sharp rise in logistics and insurance costs is expected to accompany the surge in oil prices.
“The magnitude of producer and consumer price increases in the next few months will be a clear indicator of the cost pass-through to individual countries.”
Recently, Prime Minister Datuk Seri Anwar Ibrahim said the government will try to maintain the price of RON95 petrol for Malaysians at the current level of RM1.99 per litre despite global market uncertainty due to the conflict in the Middle East.
Anwar, who is also the Finance Minister, said the increase in global oil prices following Strait of Hormuz disruptions is expected to affect the country, but the government is nonetheless determined to hold the subsidised RON95 price under the Budi Madani RON95 (Budi95) programme.
“God willing, for the people of Malaysia, I will try to ensure there is no increase in fuel prices.
“We will give the maximum effort to hold off on raising prices. But the market is beyond our control, and we cannot guarantee there will not be any price increase,” he said.
