PUTRAJAYA - Datuk Seri Najib Tun Razak announced a RM5.5 billion (S$2.04 billion) cut in government spending to maintain economic growth at between 4.5 per cent to 5.5 per cent this year amid plummeting oil prices.
Although the Government is cutting its Operating Expenditure this year – which includes deferring the National Service programme and freezing allocations on new government vehicles and office equipment – Development Expenditure worth RM48.5 billion for infrastructure projects would be maintained and spent.
In addition, the Prime Minister announced 36 measures to help the people, including a RM3.29 billion allocation for flood victims as well as steps to boost tourism and small and medium-scale industries.
“We are not in crisis. Indeed, we are taking pre-emptive measures following the changes in the external global economic landscape which is beyond our control,” Najib, who is also Finance Minister, said in his special address to the nation, broadcast live on television and radio.
Ministers, heads of government linked companies and representatives from civil society groups attended the event held at the Putrajaya International Convention Centre.
With the price of the benchmark Dated Brent oil falling by over 50 per cent per barrel in the past six months from US$115 (RM414) on June 19 to US$48 (RM173) on Monday, Najib said the consensus among economists was that the forecast price of US$100 (RM360) per barrel used in the 2015 Budget was no longer realistic.
As such the Government has decided to revise downwards its forecast for the average baseline oil price to US$55 (RM198) per barrel for this year.
The falling oil prices has also led the Government to revise this year’s target for the fiscal deficit – the gap between government spending and revenue.
The deficit which was set at 3 per cent of Gross Domestic Product (GDP) in Budget 2015 would now be revised to 3.2 per cent, which would still be lower than the 3.5 per cent recorded in 2014.
Najib said that without any fiscal measures, the deficit would increase to 3.9 per cent of GDP this year.