Malaysian economy not in crisis, says Najib as he trims forecast

KUALA LUMPUR — Plunging oil prices forced Malaysia yesterday to cut its economic growth forecast and announce a slew of austerity measures, even as Prime Minister Najib Razak sought to reassure investors that South-east Asia’s third-largest economy was “not in crisis”.

The economy will expand 4.5 per cent to 5.5 per cent this year, down from an earlier projection of as much as 6 per cent, Mr Najib said in a speech in the administrative capital of Putrajaya yesterday. He also revised the 2015 budget gap to 3.2 per cent of gross domestic product (GDP), up from the original 3 per cent, but pointed out that this was still lower than the 3.5 per cent registered last year.

“We are not in crisis,” Mr Najib said. “Indeed, we are taking pre-emptive measures following the changes in the external global economic landscape which is beyond our control. This is to ensure that our economy continues to attain a respectable and reasonable growth.”

Malaysia is the second-largest oil and natural gas producer in South-east Asia, with oil-related contributions making up almost 30 per cent of its annual state revenue.

Mr Najib said the 2015 budget, announced in October, was based on oil prices averaging US$100 a barrel, but this projection was no longer realistic as global crude prices have dropped by more than 50 per cent. He said the government lowered its oil price forecast to US$55 a barrel, which would lead to a revenue shortfall of RM8.3 billion (S$3.08 billion) despite savings from the removal of fuel subsidies last year.

To trim the budget, Mr Najib said operating expenditure would be cut by RM5.5 billion, but development spending would remain unchanged at RM48.5 billion. Proposals to increase electricity tariffs would be delayed, he said, and state-run firms would be encouraged to invest inside the country.

Among the money-saving strategies announced were deferring the 2015 National Service to enable the programme to be reviewed and enhanced; and optimising outlays on supplies and services, especially overseas travel, events and functions and use of professional services. Transfers and grants to statutory bodies, government-linked companies, and government trust funds would also be reviewed. Without austerity measures, Mr Najib said the budget deficit would shoot up to 3.9 per cent of GDP this year.

The announcement yesterday prompted criticism from Malaysia’s opposition Democratic Action Party (DAP), who took Mr Najib to task for revising the national budget after it had been approved by lawmakers last year, saying the Prime Minister’s actions showed he treated Parliament as a “rubber stamp” for decisions made by the “dictatorial” executive.

The DAP’s national publicity secretary Tony Pua also took Mr Najib to task for painting a positive picture of the Malaysian economy to the people by saying that the country was not in crisis, while real problems were being ignored. AGENCIES