With oil prices above US$100 costing RM4 billion a month in RON95 subsidies, Williams says behavioural change is urgently needed and that Malaysia can emerge stronger if today’s challenges become a catalyst for reform.
By TENGKU NOOR SHAMSIAH TENGKU ABDULLAH
KUALA LUMPUR, April 7 – Malaysia’s economy is under pressure from an oil price shock, but the country’s underlying fundamentals remain sound and policymakers are responding positively, according to economist Prof Geoffrey Williams of Williams Business Consultancy.
In an interview with TNS News, Prof Williams assessed the country’s economic position, the growing burden of fuel subsidies, the case for wider work-from-home arrangements and what Malaysia must do over the next 12 months to emerge stronger from the current global turbulence.
EXTERNAL HEADWINDS ARE A CONSTANT BUT MALAYSIA HOLDS
Asked how Malaysia’s economic position today compares with a year ago, Prof Williams placed the current pressures in a longer perspective.
“A year ago Malaysia was facing an increasingly uncertain economic environment due to tariffs. Two years ago it was a US-China trade war. Now Malaysia is facing an increasingly uncertain economic environment due to the oil shock,” he said.
“In other words there are always external headwinds. Malaysia is resilient and policymakers are proactive so the outlook is still sound.”
He noted that Bank Negara Malaysia’s latest assessment is broadly consistent with this view.
“The assessment from BNM reflects uncertainty but also remains positive, with the growth forecast range increasing to 4–5% from the previous upper forecast of 4.5%,” Prof Williams said.
“This reflects their assessment that the strong momentum from the end of last year is continuing so far into 2026. Also investment returns are beginning to materialise and trade, especially with the US, is very strong.”
SUBSIDIES COSTING RM4 BILLION A MONTH
On the question of when oil prices begin to bite into government finances, Prof Williams was specific.
“Government finances are already under pressure at oil prices above US$100 per barrel because RON95 subsidies are costing RM4 billion per month,” he said.
He did not see an immediate inflation crisis, however.
“As for inflation, since RON95 prices are fixed at RM1.99 per litre and since there are no changes to the diesel quotas or prices there really should not be too much inflationary pressure,” Prof Williams said.
“Import prices may rise but the ringgit is still strong and this helps keep imported inflation in check. Headline inflation is low around 1.4% so even if prices rise overall inflation will still be around or below the historical average.”
SUBSIDY RATIONALISATION IS INEVITABLE
On whether the government can sustain the current subsidy structure, Prof Williams was direct.
“The government does not have room to maintain the current petrol subsidies for very long. The cost is too high and behavioural change is required to reduce demand and consumption of petrol and diesel. This means cutting the quota or introducing tiered pricing,” he said.
He added that demand management must accompany any fiscal adjustment.
“Behavioural change is required to economise on petrol consumption including WFH and reducing the quota more,” Prof Williams said.
THE WFH CASE AND THE MINDSET THAT BLOCKS IT
Prof Williams made a detailed case for work-from-home as an economic policy tool, but he was candid about the cultural obstacle standing in its way.
“Experience of working from home in many economic studies shows that it improves productivity, work-life balance, staff retention and cuts costs,” he said.
“This requires management change including a move to delivery-based work rather than ‘time in office’-based work. This is the real challenge because most Malaysian managers care more about your workplace attendance than your workplace performance. So the mindset needs to change.”
Malaysia’s fuel subsidy burden rises sharply when global oil prices exceed US$100 per barrel, with RON95 subsidies estimated to cost around RM4 billion per month. Economist Geoffrey Williams says sustained energy price pressures could increase fiscal strain, even as Malaysia’s broader economic fundamentals remain resilient.
SUPPLY, NOT PRICE, IS THE CRITICAL RISK
Looking beyond the price dimension of the current oil shock, Prof Williams pointed to supply security as the more fundamental concern.
“Beyond oil prices by far the most important issue is oil supply. In fact supply of petrol and diesel is much more important than price,” he said.
“This is why stocks must be preserved by reducing demand, spreading out consumption and even restrictions on exports to retain oil products for domestic use.”
A 12-MONTH REFORM AGENDA
Asked to name Malaysia’s top economic priority for the year ahead, Prof Williams outlined a focused reform agenda.
“Over the next 12 months Malaysia should prioritise learning lessons from the current challenges and turning them into a catalyst for economic reforms focused on further subsidy rationalisation, WFH as a routine option, shifting the energy mix under the NETR and diversification of oil supplies,” he said.
STRONGER, IF REFORM FOLLOWS
Closing the interview, Prof Williams offered a conditional but optimistic outlook.
“Looking ahead the underlying fundamentals of the economy are sound, policymakers are responding positively and Malaysia can come out stronger if the challenges are a catalyst for reform,” he said. – TNS NEWS