Economist Predicts Fuel Price to Further Increase


SHAH ALAM, 29 Oct: The Federal Government is expected to cut fuel subsidies for the second time to handle the fiscal deficit faced for 15 years in a row, and cause the price in the market to increase in 2014.

The World Bank Economist, Dr Frederico Gil Sander, predicted that the central government would act in this manner as the fuel subsidies are the highest amount spent each year.

He said it is estimated that RM24.8 billion or 53 percent of the total RM47 billion spent are on subsidies.

Prime Minister, Datuk Seri Najib Razak announced the increase in the price of RON95 and diesel by 20 cents, thus causing anger and criticism from the people and Pakatan Rakyat (PR) in September.

“There is bound to be at least one more fuel subsidy cut in 2014, in order for Malaysia to achieve its subsidy rationalisation numbers,” he said.

Fredrico was quoted from the Malaysian Insider saying that based on that, it is a clear indication that Putrajaya will take the rationalisation move as a result of the tabling the Budget 2014 on 25 Otober.

“If you look at allocation, for fuel allocation is expected to decline quite significantly next year. Which I think signals probably some fuel subsidy rationalisation in order for targets to be met,” said the Bangkok-based economist who specialises in Malaysia.

Prior to this, PR leaders also urged the central government to reduce car priced before increasing fuel prices because the increase would cause the maintenance cost of taxis to increase by 30 percent, thus reducing the net income of taxi drivers.

The increase would also impact the economic cycle causing the price of goods and services to drastically increase, in addition to burdening consumers.

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