By P Prem Kumar
KUALA LUMPUR
Prime Minister Najib Razak Tuesday denied Malaysia was on the brink of recession in the face of falling oil prices and a weakening currency.
“We are not in crisis,” he said in address broadcast nationally. “Indeed, we are taking preemptive measures following the changes of the external global economic landscape, which are beyond our control.”
Razak, who also acts as finance minister, outlined key cost-cutting “proactive” strategies to strengthen Malaysia's economic resilience as he reduced growth predictions to 4.5 percent to 5.5 percent for the year, down half-a-percent on October’s forecasts.
The deficit target was also changed from 3 percent to 3.2 percent although the government retains its long-term aim of a balanced budget by 2020.
The slump in global oil prices had pushed Razak to amend the 2015 budget, drafted on the assumption that oil would remain around $105 a barrel. Malaysia receives around 30 percent of government revenue from oil and the price currently hovers around $50 a barrel.
The fall in oil has also brought the ringgit down. The currency fell to 3.6045 to the dollar on Jan. 14, the lowest since 2009.
Without government intervention, the country's deficit would reach up to 3.9 percent this year, said Razak. The deficit in 2014 was 3.5 percent.
The measures were led by a 5.5 billion ringgit ($1.52 billion) cut in spending to mitigate a 13.8 billion ringgit shortfall in revenue, Razak said.
Zeti Akhtar Aziz, the governor of the country’s central Bank Negara Malaysia, said interest rates would remain unchanged to encourage growth.
She said: “From time to time, we will review our interest rates. But, at the moment, the rates are highly accommodative for growth and we are in a very strong position with steady growth.”
The bank had held borrowing costs in the two most recent policy meetings after becoming the first in Southeast Asia to raise its benchmark interest rate in 2014, to 3.25 percent.
