Najib warns of economic crisis if oil price plunges below US$70

Former prime minister Najib Razak says the previous Barisan Nasional administration had worked hard to reduce the government’s dependency on oil as oil prices are not stable. (Bloomberg pic)

PETALING JAYA: Najib Razak today warned that the country could experience an economic crisis should the price of oil drop below US$70 per barrel.

In a Facebook post, the former prime minister explained that the drop in oil price will see the country’s deficit worsening and the ringgit depreciating.

“The pressure on the government’s fiscal position will double,” Najib said.

The former finance minister said during a debate a few months ago, he had warned that the government’s projection of the oil price at US$70 a barrel was risky, as oil prices were not stable, and hinged on geopolitical factors.

In addition, Najib said, the US has become one of the biggest oil producers.

He went on to say that the previous Barisan Nasional administration worked hard to reduce the government’s dependency on oil to 16% from 42%.

And this, Najib said, spared Malaysia from an economic crisis when the price of oil plummeted to US$28 per barrel.

“Yet, the Pakatan Harapan government is depending a lot on oil in 2019, and if the price of oil plunges below US$70 as projected, the Malaysian economy could experience an economic crisis.”

Najib’s warning today followed his statement on Facebook yesterday that the country’s credit rating could be affected following Moody’s decision to downgrade Petronas’ outlook from stable to negative.