Falling Crude Oil Prices Hurt the Malaysian Ringgit


CEIC Macro Watch Global #41 - February 27, 2015 Crude oil prices declined for a seventh consecutive month in January 2015, reaching USD 45.13/barrel (Brent blend) by the mid-point of the month, their lowest level since March 2009, before registering a mild recovery to USD61.86/barrel as of February 16th. Even at current levels oil prices are severely depressed compared to last year’s levels and the decline has severely damaged Malaysia’s fiscal revenue base as its fiscal receipts rely substantially on contributions from the nationalised oil and gas industry. In 2013 petroleum income tax and royalty contributed respectively MYR 29.75 billion (13.9% of central government revenue) and MYR 6.19 billion (2.9% of central government revenue) to total budget revenue. The plunging oil prices inevitably affected the Malaysian Ringgit, which fell to MYR 3.634/USD by 29th January, 2015, its lowest level since April 2009, as a result of the significant decline in export revenues from crude oil. In an effort to mitigate the pressure on the ringgit, Bank Negara Malaysia, the central bank, started to utilise its foreign exchange reserves to purchase ringgit. Malaysia’s foreign exchange reserves fell to USD106.4 billion in January 2015, their lowest level since March 2011. However, according to its latest monetary policy statement released on 28th January, 2015, the central bank has leaned in favour of sustaining economic growth. Hence, the overnight policy rate has been kept at 3.25% rather than raising it in support of the currency. By Raves Laiu in Malaysia - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

27th February 2015 Falling Crude Oil Prices Hurt the Malaysian Ringgit

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