Economists warn Malaysia may face inflationary pressure if global oil prices remain high, as fuel subsidies could strain government finances.
PETALING JAYA: Malaysia may need to brace for prolonged inflationary pressures if global energy prices remain elevated, as continued fuel subsidies could place a growing strain on public finances, say economists.
Taylor’s University research cluster lead for innovative management practices Prof Dr Poon Wai Ching said the current fuel subsidy framework, while effective in cushioning short-term price shocks for consumers, could become increasingly fiscally burdensome if international oil prices remain high over an extended period.
“This would also limit the government’s fiscal flexibility to respond to other economic priorities. Policymakers may need to consider a comprehensive and forward-looking strategy that balances immediate consumer protection with long-term fiscal sustainability.”
Poon said measures such as gradual subsidy rationalisation, targeted assistance for vulnerable households, diversification of energy sources and accelerated investments in renewable energy and energy efficiency could help strengthen Malaysia’s economic resilience.
She said the Middle East conflict and disruptions to maritime traffic through the Strait of Hormuz have affected the global energy market.
She pointed out that the strait is among the world’s most critical maritime chokepoints, with about one-fifth of global seaborne oil and liquefied natural gas passing through the narrow waterway.
“Market analysts have already warned that a prolonged disruption could precipitate a severe and sustained energy crisis, with crude oil prices potentially escalating well beyond recent levels due to constrained supply and increased geopolitical risk premiums.”
Poon said the situation could have broader macroeconomic consequences for countries.
“Such cost-push pressures may subsequently translate into broader inflationary trends within the Malaysian economy, affecting both household consumption and industrial competitiveness.”
Putra Business School economic analyst Assoc Prof Ida Md Yasin also highlighted that Malaysia may eventually need to review its fuel pricing structure if global oil prices continue to rise sharply.
The Sun Malaysia
