Plunging Commodity Prices and the Impact on Malaysia

Last month, Malaysia cut its 2016 growth forecast and slashed spending plans as the economy continues to suffer from falling oil prices. Oil and commodities are very important to Malaysia’s economy, with palm oil, in particular, being one of its foundations. Gas and rubber are also important sectors. So falling global commodity prices have hurt Malaysia badly. According to an article in the Straits Times, the Malaysian government has said that “each $1 drop in oil prices slashes RM 300 million [roughly $72 million] from its annual revenue.” As a result, the government has tried to plug the hole in the state budget through a new 6 percent value-added tax, known as the Goods and Services Tax (GST). Introduced last year, the tax is not very popular and in fact has sparked significant protests in Malaysia.

For more on my assessment of Malaysia’s current economic prospects, and the impact of Malaysia’s economic challenges on Malaysian politics, read my interview with World Politics Review.