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Economic Impact of Removing Energy Subsidies in Malaysia

Macroeconomy, Energy

Economic Impact of Removing Energy Subsidies in Malaysia


The share of demand for fossil-fuel based energy (i.e. coal and oil) in Malaysia will remain the largest in 2035. This significant demand is largely driven by the stable economic growth as well as the energy prices that are kept low by its energy subsidy policy across sectors. While it is widely acknowledged that subsidy encourages overconsumption and inefficient resource allocation, subsidy reforms will bring structural changes at all economic levels. Therefore, the effects of fuel subsidy removal need to be simulated to help government formulate mitigating measures to cushion the effects on most affected sectors. This research is divided into two parts: the first part estimates the price impact on industry subsectors as an offshoot of energy subsidies removal by applying 2010 Malaysian Input-Output Table; the second part measures the economic impact of removing energy subsidies using a Malaysian macroeconomic model.

Full Report







List of Figures

List of Tables

List of Abbreviations

List of Project Members

Executive Summary

Part I Price Impact Analysis on Other Industrial Subsectors by Removing Energy Subsidies in Malaysia: Applying the 2010 Malaysian Input-Output Table

  • 1.1. Introduction

  • 1.2. Data and Methodology

  • 1.3. Study Result

  • 1.4. Conclusion

  • References & Appendices (Part I)

Part II Economic Impact of Removing Energy Subsidies: A Quantitative Analysis

  • 2.1. Introduction

  • 2.2. Methodology for Analysis

  • 2.3. Impacts via Three Paths

  • 2.4. Overall Economic Impact

  • 2.5.Conclusion and Implications

  • References & Appendices (Part II)


27 October 2016


Malaysia, Energy, Finance and Macroeconomy


Dato Dr. Nadzri bin Yahaya, Inu Baizura binti Mohamad Zain, K. Ramnick Lal Verma, Ku Nurfarah Zahirah binti Ku Abdul Rahman, Khairunnisa Azira binti Talib, Aiza Mahani binti Mozi, Nasrun bin Nawiham, Sivabalan A/L Dhanabal, Azuwan bin Azahar, Shigeru Kimura, Tsani Fauziah Rakhmah, Shigeru Suehiro, Akira Yanagisawa, Tuan Ab Rashid bin Tuan Abdullah, Zaharin Zulkifli


Shigeru Kimura

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