SINGAPORE (Jan 8): It is timely for Malaysia to revise its Budget 2015 to account for the rapid decline in crude oil prices, which could potentially stall its fiscal deficit target, said Credit Suisse director and head of Malaysia equity research Tan Ting Min.

“They (the Malaysian government) definitely has to do a revision because Budget 2015 used an oil price assumption of US$100 per barrel. As a result, we think it will be very difficult for them to hit the fiscal deficit target of 3% this year,” Tan told a media briefing on the sidelines of the Credit Suisse's 4th Annual Macro Conference and 6th Annual Asean Conference here today.

The government has trimmed its fiscal deficit to 3.9% of gross domestic product (GDP) in 2013 and is expected to further reduce it to 3.5% in 2014. A slew of rationalisation measures, particularly the removal of the fuel subsidy from Dec 1, 2014 to a managed float system, has eased the pressure on government expenditure.

Previously, the government had indicated that it intended to have a balanced budget by 2020.

Since Prime Minister Datuk Seri Najib Razak presented Budget 2015 back in October, Brent crude prices had fallen from US$100 to just above US$50 presently. It is worth noting that at present, the government has yet to indicate when and how it intends to have a re-look at the country’s projected petroleum earnings, which would amount to far less at present oil prices.

Oil and gas-related income is a backbone of the Malaysian economy as it currently accounts for 30% of the government’s total revenue.

To account for lower petroleum revenue contribution from Petroliam Nasional Bhd (Petronas), an alternative for the government would be to request the state-owned oil major to increase the quantum of its dividend payment this year. Petronas paid the government dividends amounting to RM28 billion in 2012 and RM27 billion in 2013.

“However, there has to be a limit. If oil price stays at US$50 per barrel, you can’t expect Petronas to pay the government the same amount as it did in previous years,” said Tan.