PETALING JAYA: Crude oil and commodity prices will continue to present challenges to the country’s economic outlook this year.

Bank Negara said the decline in prices would have an impact on the economy, given that commodities comprising crude oil, liquefied natural gas (LNG) and crude palm oil (CPO) accounted for 23% of exports and 15% of production, while manufactured products comprise 77%.

“In terms of trade balance, as a large net exporter of LNG and CPO, the lower prices of these commodities will weigh on the trade position this year,” it said.

However, the central bank said the country’s trade position would benefit from the lower cost of imported petroleum products despite receiving less proceeds from crude oil exports.

Furthermore, the drop in oil prices would mean that households would have an estimated RM7.5bil in total annual savings.

In addition, stronger US economic growth momentum and the continued expansion of China and other regional economies would continue to support external demand.

Investments in the mining sector, which accounts for 19% of the economy, would be affected due to the drop in prices but overall capital spending would remain resilient, as the services and manufacturing sectors would support investments.

Bank Negara said steps had been taken to diversify fiscal revenues in recent years as part of measures to manage the persistent decline in crude oil prices.

“The improvement in global growth will also provide support to manufactured exports and the overall trade position,” it said, while lower commodity prices would contribute to a narrower trade and current account balance.

 

Source : The Star

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