By Viktor Chong viktorchong@thestar.com.my

PETALING JAYA: The shortfall of RM21bil from the removal of the goods and services tax (GST) will not be a cause for concern as oil sales revenues can help mitigate the situation, said IQI chief economist Shan Saeed.

Speaking at the StarProperty.my Post GE-14 Forum, Shan said oil prices are currently trading at USD76 per barrel. “At IQI, we are setting USD60 at USD87 per barrel this year, and if it touches USD83 per barrel because of the drop in USD, it means that the budget was made at USD55 to USD83 per barrel,” said Shan.

Therefore the Malaysian government will be getting USD28 per barrel, which suggests revenue of around RM12bil to RM13bil.

Shan said geopolitical risks would go up, coupled with the drop in USD, adding that the demand for oil will continue to rise.

“If oil touches USD90 per barrel, which we believe is very much possible, the Malaysian government will get a revenue of around RM17bil to RM18bil,” he said.

When compared to the shortfall of RM21bil from the removal of GST, a residue of RM2bil to RM3bil can be collected through aggregate demand.

The removal of GST is not a problem as the primary contributor towards the GDP of a country is consumption, which contributes about 70% of the country’s GDP. According to Shan, two factors have emerged in the past ten years, which are fear and confidence.

When the people have confidence in the economy, the GDP would be on the upsurge, while fear will drop the economy.

“Real estate is directly linked to the macroeconomy,” said Shan, adding that it is the macroeconomy that drives real estate, not the other way around.

If the GDP increases, then the real estate market will improve alongside it. “The Malaysian GDP touched 5.4% in the first quarter while last year it touched 5.8%,” he said.

Developers would also be using market penetration strategies such as more discounts to entice customers. Shan added that foreign investors would eventually purchase more properties in the Malaysian market as they believe that the economy is in good hands.