Malaysia trimmed its growth expectations for this year after a decline in oil prices crimped the outlook for exports and government revenue.
Malaysian Prime Minister Najib Razak is counting on consumers to hold up the economy, finding ways to put more money in their pockets.
The government is to reduce mandatory employee contribution rates to the national pension fund by 3 percentage points in a move that could boost private spending by 8 billion ringgit (US$1.9 billion) per year, Najib said in a speech yesterday.
The economy is to expand 4 to 4.5 percent this year, compared with an earlier projection of as much as 5 percent, he said.
The government is sticking to its budget deficit target of 3.1 percent of GDP for this year, Najib said, adding he was confident the economy grew 5 percent last year and the fiscal shortfall was 3.2 percent of GDP.
“Prudent measures” by the government would save 9 billion ringgit in operating and development expenditure, he said, without elaborating on steps that would be taken to achieve those savings.
A plunge in crude is forcing Najib to reassess spending plans for a second year to keep fiscal deficit targets in check and avoid a credit rating downgrade.
Malaysia, as Asia’s only major net oil exporter, risks losing 300 million ringgit for every US$1 per barrel drop, according to government estimates.
The government is now assuming Brent at US$30 to US$35 a barrel this year, compared with US$48 when the expenditure plans were first tabled in October last year.
The ringgit gained 0.7 percent to 4.2253 per US dollar in Kuala Lumpur yesterday. The Malaysian currency has strengthened about 1.6 percent against the greenback this year, after tumbling more than 18 percent last year.
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