Tumbling oil prices are putting pressure on Malaysias commodity- driven economy, not merely by hurting its exports and currency but more so by putting an unwelcome spotlight on the huge debts that the country runs. Malaysia, a major exporter of liquefied natural gas and oil, is suddenly faced with the risk that the cheapness of oil and other commodities will drive the current account into a deficit. That would be the fourth red light blinking on the dashboard of an economy running on debt on all fronts: government, households and the capital account. The possibility has unnerved foreign investors who have US$45 billion (RM160 billion) parked in the countrys bonds and have lent a total of US$208 billion (RM741 billion) to the high-yielding Southeast Asian country. The current account surplus narrowed by almost a third to RM7.6 billion between the first and third quarter of 2014, and the prospects of a deficit are looming as oil and gas export earnings fall. Malaysia already is a net importer of foreign capital. Its households are bursting at the seams with debt. And the government, which until recently could always count on generous oil revenues to fund pet projects, has borrowings that amount to 53 percent of economic output, almost equalling Asian giants India and China. Digging a little deeper, it is easy to understand why credit markets now rank Malaysia the riskiest in Southeast Asia and why the ringgit has plunged to a six-year lows.
Posted on: Wed, 21 Jan 2015 22:07:29 +0000
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