May 11 (UPI) -- Malaysia's new government will need to act quickly to capitalize on any economic momentum from higher crude oil prices, an analyst said.
The opposition Pakatan Harapan coalition emerged as the victor in May 9 general elections in Malaysia, grabbing a slim majority in parliament with 113 seats. The 92-year-old Mahathir Mohamad, who left office 15 years ago, was until two years ago an advisor to Malaysia oil and gas company Petroliam Nasional Berhad, better known as PETRONAS. He's now the country's new prime minister.
"The result is nothing short of a political earthquake, although there are still many unknowns at this stage," Steve Jenkins, a vice president for chemicals at consultant group Wood Mackenzie, said in remarks emailed to UPI. "The impact of the change in government in Malaysia on its oil, gas and chemicals sector is likely to be tied in to changes in the country's wider economic policy, but could be dramatic in their own right."
Malaysia is one of the top natural gas exporters in the world, behind Qatar. That bodes well for the Southeast Asian economy as many of the regional island nations depend on the super-cooled liquefied natural gas to keep their momentum going.
In March, PETRONAS formed a strategic alliance with the Saudi Arabian Oil Co., commonly known as Saudi Aramco, to get refinery feedstock from its Saudi partners. Two weeks ago, PETRONAS marked the start of a 15-year sales agreement with South Korean Oil Refining Co. with its first Korean delivery of LNG.
Mohamad was in power during the Asian financial crisis in the late 1980s and successfully navigated the economy out of trouble. For the oil and gas sector, his new government could do away with tax legislation meant to reduce dependency on oil and gas revenue. That legislation was enacted three years ago, just as crude oil prices started to tumble toward $30 per barrel.
Brent crude oil, the global benchmark for the price of oil, was trading near $77 per barrel early Friday.
The International Monetary Fund, which has been at odds with Malaysian governments, estimated in March that growth in gross domestic production would be around 5.8 percent this year. The Malaysian economy, however, faces risks because tighter financial conditions for the world's advanced economies could lead to domestic stress, the IMF said.
"The newly elected government will need to act quickly to establish confidence and stability in its ability to manage the economy, to calm financial markets and to set out a clear budget which will begin to shed light on how it intends to address some of its campaign pledges," Jenkins said.