The Nomura Research has revised up Malaysia’s 2018 gross domestic product (GDP) forecast to 5.5 percent from 5 percent, due to improving oil prices.
As a net exporter of oil (0.3 percent of GDP) and an even larger net exporter of liquefied natural gas (LNG) (2.6 percent of GDP) – the price of which is closely linked to oil, Malaysia stands out as a clear-cut winner in the region from higher oil prices, Nomura said in its Asia Economic Outlook report released Thursday.
“(Malaysia’s) GDP growth has strengthened throughout 2017, with both domestic and external engines firing, and should rise to 5.8 percent for the full year from 4.2 percent in 2016, setting up a solid springboard into 2018,” it said.
Nevertheless, its forecast represents a mild slowdown in 2018 from 2017, as the favorable base effects in crude palm oil production growth stemming from bad weather in 2016 should fade more notably.
The research house also said the robust exports and the rise in oil prices should buttress Malaysia’s 2018 current account balance, for which it now projects a surplus of 2.5 percent of GDP in 2018, from 2 percent previously. The forecast is only slightly lower from its 2017 forecast of 2.7 percent.
“We estimate that every USD10/bbl increase in oil prices would widen the trade surplus by about 0.4 percent of GDP,” it said.
Nomura also sees higher oil prices to reduce the risk of fiscal slippage. Its estimates show an additional 0.2 percent of GDP in oil revenue for every USD10/bbl increase in the oil price. Oil revenue is estimated to account for 14.8 percent of budgeted revenue in 2018.