KUALA LUMPUR (AFP) – Malaysia trimmed its 2015 growth forecast Tuesday and said its fiscal deficit would be wider than expected after the sharp fall in global oil prices threw a wrench in the petroleum-exporting nation’s economic plans.
Prime Minister Najib Razak called the situation a “reality check” but assured Malaysians the country was not in trouble, unveiling measures he said would keep Southeast Asia’s third-largest economy moving forward.
“We are not in crisis. Indeed, we are taking pre-emptive measures following the changes in the external global economic landscape which are beyond our control,” Najib said in a nationally televised speech.
Najib said the government had lowered its economic growth estimate to a 4.5-5.5 per cent range, from an earlier projection of up to 6 per cent.
The target for reducing the fiscal deficit was also tempered to 3.2 per cent of GDP, from an earlier 3.0 per cent target stated in a 2015 budget tabled three months ago.
Malaysia derives 30 per cent of state income from energy exports, and the more than 50 per cent drop in world oil prices has dragged the ringgit currency to around six-year lows and rattled investors.
The stock market has stumbled and business confidence has slid, according to surveys, and pressure had been growing on Najib to act to address the growing unease.
Many consumers complain of increasing difficulty making ends meet, particularly after a range of subsidies were lifted recently on key goods, and with the introduction of a 6 per cent consumption tax looming on April 1.
Najib announced steps to promote trade, tourism, investment, and domestic consumption while also reducing business costs, and said hundreds of millions of dollars would be allocated for recovery efforts in parts of northern Malaysia devastated by floods that began late last month.
Najib said government spending also would be trimmed, but not the 48.5 billion ringgit ($13.4 billion) budgeted for development expenditures including a slew of large infrastructure projects considered key to keeping the economy humming.
The World Bank recently shaved its GDP growth forecast for Malaysia to 4.7 per cent from an earlier 4.9 per cent, still enviable but off the historic pace for the Southeast Asian “tiger” economy.
But analysts say Malaysia should weather the storm because, with a thriving manufacturing sector, it is less dependent on energy than some other exporting countries like hard-hit Russia.