Monetary constraints make it tough to roll out the ‘perfect’ response
KUALA LUMPUR: Malaysia’s ability to shield businesses and consumers from the fallout of the Middle East conflict is severely constrained by limited fiscal space, heavy food imports and volatile energy prices.
Datuk Seri Johari Abdul Ghani said the government is studying targeted measures to soften the economic fallout from the conflict, but the situation is shifting too quickly for any policy response.
The Investment, Trade and Industry Minister said the fluid nature of the conflict makes it difficult for the government to roll out a “perfect” response, with conditions changing almost every fortnight.
“Whatever action we want to take today would not be a perfect one because the conflict changes every two weeks.
“Sometimes it is okay, sometimes it is not okay. How do you plan?” he told reporters after the Vaisakhi 2026 celebration at the Guru Nanak Darbar Tatt Khalsa Diwan here yesterday.
Johari said the immediate focus is to prioritise sectors that directly affect the public, with food security at the top of the list.
He noted that Malaysia imports most of its food requirements, amounting to about RM100bil annually, leaving the country exposed to global price spikes and supply disruptions.
“Anything that happens to the cost or availability of food will definitely affect us,” he said.
Johari added that energy costs are the second major concern, especially as Malaysia remains vulnerable despite its oil and gas resources.
He said many people do not realise that while Malaysia is a net exporter of gas, the gains are limited because gas prices only capture about 13% to 15% of prevailing oil prices, and even then only after a lag due to long-term contractual arrangements.
“If oil goes up to US$120 today, gas does not immediately move because a lot of our contracts are long-term,” he said.
He stressed that Malaysia remains a net importer of fuel overall, making the country susceptible to prolonged price shocks if tensions worsen in key shipping routes.
In support of industries, Johari said the government is examining in detail what more can be done to ease the burden on the business community, particularly companies grappling with rising logistics, insurance, and production costs.
However, he was candid that the government’s biggest constraint is its limited fiscal firepower.
He said Malaysia is not in the same position as wealthier economies that are able to deploy large emergency stimulus packages backed by surplus reserves.
“Unlike some rich countries with surplus cash, we don’t have that,” he said.
Johari pointed out that Putrajaya is still servicing about RM1.3 trillion in debt, significantly narrowing the room for aggressive intervention.
