KUALA LUMPUR, Jan 20 — Malaysia’s ringgit fell for a second day and bonds dropped as Prime Minister Najib Razak revised the fiscal deficit target higher amid a plunge in oil prices and at the same time lowered the 2015 economic growth forecast.

 

The budget shortfall will come in at 3.2 per cent of gross domestic product this year, instead of the previous 3 per cent estimate, Najib said in a special session in Putrajaya outside the capital Kuala Lumpur Today. The economy will expand 4.5 per cent to 5.5 per cent in 2015, versus 5 per cent to 6 per cent, he said, adding that the nation isn’t in crisis.

“The ringgit is still weak because the market is reacting to the higher fiscal deficit for this year and lower GDP growth forecast,” said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. “The ringgit is seeing selling pressure and could weaken further in the near term.”

The currency fell 0.6 per cent to 3.5915 a dollar as of 11.18am in Kuala Lumpur Today, adding to yesterday’s 0.4 per cent loss, according to data compiled by Bloomberg. The ringgit dropped to 3.6045 on January 14, the lowest since 2009. The five-year government bond yield climbed two basis points, or 0.02 per centage point, to 3.81 per cent.

The FTSE Bursa Malaysia KLCI Index of shares stayed lower, and was last down 0.4 per cent.

The currency has weakened 11 per cent in six months on concern that a slump in Brent crude will reduce earnings for Asia’s only major oil exporter and weigh on the current-account surplus, a key support for the ringgit. The balance must remain in surplus, the prime minister said today.

Inflation data

Najib stressed that the government will take specific and proactive measures to support the economy. Without official intervention, the 2015 fiscal deficit would be 3.9 per cent of GDP, he said.

Oil-related industries account for a third of the Southeast Asian nation’s state revenue. Najib said Malaysia is actually a “net petroleum importer” as he cut the oil price assumption target to US$55 (RM196) a barrel. Brent dropped 0.2 per cent to $48.76, adding to yesterday’s 2.7 per cent decline.

Official data tomorrow may show inflation slowed to 2.8 per cent in December from a year earlier, versus 3 per cent the previous month, according to the median forecast in a Bloomberg survey. — Bloomberg