PUTRAJAYA: Prime Minister Datuk Seri Najib Razak (pic) said the country is not in crisis, amid falling crude oil prices and the ringgit slumping to a six-year low.

“We are neither in a recession nor a crisis as experienced in 1997/1998 and 2009, which warranted stimulus packages,” he said in a special address to announce revisions to the national budget for 2015 here yesterday. The room was packed with local and foreign journalists, economists and corporate leaders.

“Indeed, we are taking pre-emptive measures following the changes in the external global economic landscape which is beyond our control,” said Najib.

The drop in crude oil prices by more than 50% has forced the government to face “a reality check” and make changes to Budget 2015 tabled last October, he added.

Najib said the government has revised the earlier crude oil price assumption of US$100 (RM359) per barrel used in Budget 2015 to US$55 per barrel. For the past two weeks, Brent crude and West Texas Intermediate prices have been floundering at the US$50 per barrel level.

“If we compare the revised figures with Budget 2015, despite the savings of RM10.7 billion from the implementation of the managed float mechanism for retail fuel prices, the government still faces a revenue shortfall of RM8.3 billion to accommodate the Budget 2015 measures,” he added.

Lately, economists and opposition lawmakers have called on the government to revise its Budget 2015 to account for the rapid decline in oil prices, which could potentially stall its fiscal deficit target.

Najib said under the revised budget, the government is changing its fiscal deficit target to 3.2% of gross domestic product (GDP) from 3% for 2015.

Nevertheless, this will still result in a year-on-year reduction from 3.5% in 2014, he noted.

“In view of the external factors, we have to acknowledge that we may not be able to achieve the earlier fiscal target of 3% of GDP as announced. Of importance is our commitment to continue reducing the fiscal deficit from 3.5% of GDP,” he said.

The government is also expecting that the revised budget will see crude oil revenues making up only 21% of its total revenue this year, from 26% as earlier forecasted.

Najib conceded that the ringgit’s significant depreciation and volatile capital flows were due to concerns over the impact of the sharp fall in oil prices on the economy.

However, he maintained this phenomenon will not result in a negative current account balance. “As a net crude oil exporter, we had a surplus of RM7.7 billion from January to November 2014. However, we are an importer of petroleum products with a net import bill of RM8.9 billion during the same period. If we include both crude oil and petroleum products, we are actually a net importer with a deficit of RM1.2 billion,” he said.

However, he added that Malaysia is a net exporter of  liquefied natural gas. The government has also lowered its GDP growth estimates to between 4.5% and 5.5% for 2015. Previously, the target was in the range of 5% to 6%.

Najib introduced a three-pronged strategy that the government hoped will result in it meeting its lower GDP target. These are ensuring balanced, inclusive and sustainable economic growth; continuing fiscal reforms and consolidation; and providing assistance to the people and business community to rebuild infrastructure damaged by floods.

Export-reliant Malaysia, which counts China as one of its biggest trade partners, will have to begin looking for more export markets amid a slowdown in the world’s second-largest economy.

Najib said the government will intensify export promotion programmes in 46 countries.

Malaysia will also actively promote import-substitution services, encouraging more private investments and consumption.

However, the government will retain its development expenditure for 2015 at RM48.5 billion, which includes projects such as public housing, flood mitigation, water supply, electricity and public transport infrastructure like the Pan-Borneo Highway.

In addition, projects such as the MRT Line 2, LRT 3 and the Kuala Lumpur-Singapore High-Speed Rail will be continued, he said.

The government also intends to cut RM5.5 billion from its operating expenditure, chiefly by deferring grants and funds to statutory bodies and government-linked entities, and optimising its spending on supplies and services.

The government could also gain RM1 billion more from collecting taxes for goods and services.

Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said in a forum the ringgit will be able to withstand the external shocks and capital outflows.

This article first appeared in The Edge Financial Daily, on January 21, 2015.