KUALA LUMPUR (Jan 26) Moody’s Investors Service says that Malaysia’s recent revised budget leaves the country’s fiscal consolidation trend intact provided the government meets its targets for 2015.

“Although downside risks to global oil prices remain, the consequent risks to Malaysia’s budget are manageable given the government’s decreasing reliance on oil revenue,” said Moody Singapore’s vice president and senior analyst, Christian De Guzman.

De Guzman said that the government’s total petroleum related receipts had reduced to 30.3% of the federal government revenue in 2013 compared to 39.8% in 2009.

“Direct taxes excluding petroleum-related receipts have driven revenue growth over the past five years, partly because of improvements in tax administration. Further diversification of government revenue will also occur later this year when a goods and services tax takes effect in April,” said De Guzman.

Moreover, dividends from the country’s national oil company, Petroliam Nasional Bhd (Petronas) have not shown strong correlation with oil prices, he added.

He, however, cautioned that the country’s external payments position remains “somewhat vulnerable” given Moody’s expectation of an eroding current account surplus and continued capital outflow.

To recap, the note was issued by Moody’s in response to the Malaysian government’s recent move to revise the national budget which lowered the country’s real GDP growth to 4.5% - 5.5% from 5%-6% in the original budget.

The country’s budget deficit was also increased to 3.2% of GDP from 3.0%.

News reports from themalaysianinsider.com last November reported Petronas president & group chief executive officer Tan Sri Shamsul Azhar Abbas urging Putrajaya to “tighten its belt” in light of the falling oil prices.

"If we are to maintain our dividend contribution or higher, it would significantly impact our growth plans," said Shamsul at Petronas’ third quarter results briefing in November.

"At this point in time, at the level of above US$65, we are okay. But below that, it is bad," he added.

At press time, crude oil (WTI) prices fell 0.41 points to US$45.03 today while Brent crude had fallen 0.35 points to US$48.46

Petronas' pre-tax profit fell 12% to RM22.8 billion in the third quarter ended September 30, 2014 (3QFY14), against RM25.9 billion in the previous corresponding quarter.