Fiscal deficit target achievable on sustained oil price — MIER

0

KUALA LUMPUR: The government’s fiscal deficit projection of 3.1 per cent this year is highly achievable if the current global oil price trend of above US$40 per barrel is sustained until year-end, says an independent think tank.

Malaysian Institute of Economic Research (MIER) Executive Director Professor Dr Zakariah Abdul Rashid predicted that oil priced would hover between US$35 per barrel and US$45 per barrel.

“It is possible to achieve the fiscal deficit target because the government reviewed the budget and it was assumed that the price of oil would be US$30 per barrel.

“Now the oil price is moving above US$40 per barrel.

“If the price is higher than that, definitely the target is easily achievable,” he told reporters after MIER’s 21st Corporate Economic Briefing yesterday.

Nevertheless, the latest development in Kuwait which saw oil and gas workers ending their three-day strike, as well as, Iran’s absence at the recent Organisation of Petroleum Exporting Countries meeting, could potentially influence the movement of oil prices, going forward.

“(So), we dont know whether it (the better price) will last long or not,” he added.

As for the ringgit, Zakariah expected the local currency to perform well this year, trading between RM3.80 and RM4.00 against the US dollar.

He cautioned market players not to over-react given any circumstances that might occur in the future, be it economic or non-economic issues, as this could have an impact on investors’ confidence and market sentiment.

Zakariah also said that Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz’s retirement, end of this month, would likely provoke sentiment in the foreign exchange market.

“We have to monitor it (ringgit movement) very carefully and should not discount any elements of over-reaction on this expected event.

“Perhaps, it will affect us for two to three weeks but it will find its own equilibrium again,” he added.

Zakariah said the ringgit took a hit last year as market players over-reacted to issues like 1Malaysia Development Bhd, Goods and Services Tax and the tumble in oil prices.

Ringgit was the worst performing currency in the Asia Pacific region last year, depreciating markedly by almost 20 per cent against the US dollar.

However, the ringgit was the biggest gainer against the greenback as compared to other regional currencies, whereby it appreciated 9.4 per cent compared to the Japanese Yen (2.2 per cent), Singapore dollar (4.6 per cent), Thai Baht (7.1 per cent) and Chinese yuan (9.0 per cent). — Bernama