Revision Of Budget 2016 Likely To Happen

A possible revision to Budget 2016 could happen as Malaysia struggles to meet its fiscal deficit target of 3.1%, according to economists.

These concerns have emerged because the government had assumed Brent crude oil to be at US$48 per barrel when it unveiled Budget 2016 in October.

However, current oil prices have dropped to US$40.75, about 15% below the budget’s estimates.

Alliance Research chief economist Manokaran Mottain told The Star that the 2016 fiscal deficit target of 3.1% could be hard to achieve if oil prices remain low, but this is not something to panic about because the Government has been prudent by assuming an average of US$48 for Brent crude next year, which is not very far off.

Independent economist Lee Heng Guie said a revision is possible if there are negative implications on revenue due to falling oil prices, The Star reported.

Meanwhile, Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said a short-term price volatility is unlikely to induce the Government to rush to review its budget, though the Government will keep a very close watch on oil prices.

Malaysia University of Science and Technology Business Faculty dean Yeah Kim Leng said the Government would further enforce its subsidy rationalisation programme and would need to look at other areas of savings to offset any earnings shortfall due to a dip in oil prices before considering a budget revision.

Brent crude oil plunged to US$40.26 per barrel on Tuesday following OPEC’s (Organization of the Petroleum Exporting Countries) meeting last week that did not come up with any solution to tackle the global oil glut.

It was reported that Saudi Arabia and Iran, two of OPEC’s biggest members, could not come up with a decision to cut production. OPEC said it would continue pumping 31.5 million barrels a day.

The glut in the market, largely contributed by the boom in production of shale oil and gas from the United States, has slashed prices down from its peak of US$115 per barrel for Brent crude in June last year to the current levels of close to US$40 per barrel.

Economists are not expecting the recent slump in oil prices to last long as they feel the global economy will recover next year and drive up demand for the commodity.

There is nothing you can do about the weakening Ringgit, but you can stretch the value of your money further by using the right credit cards.

[Source]