THE government should focus on minimising the impact of imported inflation triggered by geopolitical uncertainty in the Middle East rather than introducing drastic controls such as energy rationing or export quotas, an economist has said.
Senior Associate Fellow at Universiti Utara Malaysia’s Institute of Economic and Financial Policy (ECOFI), Associate Professor Dr Irwan Shah Zainal Abidin, said strengthening the country’s economic fundamentals would be the most effective way to cushion Malaysia against external price shocks.
He said policymakers should prioritise efforts to limit the pass-through effects of rising global prices on the domestic economy.
"The important thing to focus on is ensuring the effects of imported inflation can be minimised. With a strong economic foundation, trade and investment performance will be encouraging and the ringgit will record stable value.
"So the government does not need to rush into radical actions such as implementing energy consumption rationing or imposing export quotas on certain goods," he told BH today.
Irwan Shah was commenting on policy responses available to Malaysia as several countries adopt precautionary measures to safeguard domestic supplies amid global uncertainties.
Some governments have introduced energy-saving initiatives and export controls as fuel costs climb and supply risks intensify.
In the Philippines, authorities have reportedly enforced a four-day work week policy in certain sectors to reduce energy consumption following rising fuel prices.
At the same time, several countries have temporarily halted exports of fuel and essential goods in order to prioritise domestic needs.
Irwan Shah said Malaysia should instead ensure that fiscal and monetary policies remain resilient and flexible in navigating the current economic environment.
He cited the continuation of subsidy rationalisation measures and the current Overnight Policy Rate (OPR), which stands at 2.75 per cent, as examples of policy settings that remain supportive.
"As an example, the subsidy rationalisation policy must be maintained, as well as the Overnight Policy Rate (OPR) which remains conducive at present at 2.75 per cent.
"With good fiscal discipline, where deficit levels and the debt-to-gross domestic product (GDP) ratio remain healthy, together with strong GDP growth last year and relatively low inflation.
"The government can actually absorb any additional costs arising from the expected continued rise in global oil prices caused by this conflict if it drags on. The increase in oil prices also has a positive effect on government revenue," he said.
Looking ahead, Irwan Shah said the government must also safeguard food prices and ensure supply stability while strengthening the domestic economy.
He added that Malaysia should intensify cooperation within ASEAN and deepen collaboration with neighbouring countries to reduce the risk of supply chain disruptions.
For instance, he suggested that the Johor-Singapore Special Economic Zone (JS-SEZ) model could be replicated along other border regions with countries such as Thailand, Indonesia and the Philippines.
"Besides that, the private sector and individuals must also manage their respective cash flows prudently and remain cautious," he said. - March 8, 2026
