Malaysia drops oil price, growth forecasts: currency to bottom Q1?

KUALA LUMPUR - As expected, Malaysia’s revised budget announced by Prime Minister Najib Razak today reflects a more sobering oil price estimate, with Najib apparently  willing to take slower growth for a sustainable level of debt.

Natixis says falling oil prices are forcing Najib to revise the budget to reflect an assumption of US$30-35/bbl versus US$48/bbl previously. The Ggovernment  has maintained the fiscal deficit target at 3.1% of GDP, but has revised the GDP forecast to 4-4.5% from 4-5% previously. “This is in line with our 3.8% GDP forecast as a result of lower Government expenditure.”

Natixis says it expects Malaysia’s currency to bottom in Q1 2016 as most of the news is already priced in “and frankly it has absorbed a lot of shock”.

Standard & Poor’s says there is no impact from the budget on Malaysia’s sovereign ratings. www.natixis.com www.standardandpoors.com (ATI).