Malaysia’s growth could be affected if prices stay above US$40

SUSTAINED crude oil prices of more than US$40 per barrel could hurt Malaysia’s gross domestic product (GDP) growth by 1.2 percentage point next year, and cut it by another 1.7 percentage point the following year, a study has found. 

Simulating the effects of a constant US$40 oil price on the GDP of various economies, London-based research house Dresdner Kleinwort Wasserstein found both growth rates and inflation to be affected by a larger degree than originally envisaged. Earlier econometric models had suggested that for every US$10 increase in the oil price, OECD GDP growth would fall by between 0.5 and 0.75 percentage points in the subsequent two years.