By Tony Pua, MP for Petaling Jaya Utara
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The Prime Minister, Dato’ Seri Najib Razak delivered his much anticipated speech presenting the revision to the Budget for 2015 to a full house of cabinet ministers, Barisan Nasional Members of Parliaments, diplomats, corporate and non-governmental organisation leaders in Putrajaya International Convention Centre yesterday.
The objective was obvious. It was a public relations attempt to demonstrate that he was in full control and that he will be able to steer the economy forward given the vastly changed economic landscape. Both local and international economists, financial analysts, business leaders and Pakatan Rakyat Members of Parliament have after all been clamouring for the Budget to be revised in the light of plummeting oil revenues for weeks.
The response to Dato’ Seri Najib Razak’s policy proposals however, clearly showed that he failed miserably to give any confidence to the financial and investment community.
The Prime Minister’s repeated assertion that “we are not in a crisis” failed to convince investors as the stock market performance continued to decline. Neither were they impressed by his little prayer, that “the current account, God willing, will remain positive, and won’t be in deficit.”
The Bursa Malaysia’s Kuala Lumpur Composite Index (KLCI) fell 0.18% or 3.2 points today to 1750.11. The muted response is deafening in the light of the fact that the KLCI had already declined more than 100 points from 1855 on 31 October 2014, less than 3 months ago.
While Dato’ Seri Najib, who is also the Finance Minister said “the government is confident that the exchange rate will over time adjust to reflect the strong economic fundamentals”, the markets gave him the immediate thumbs down by further selling down the Ringgit.
The ringgit weakened 0.9 per cent to a low of 3.6030 per dollar after the prime minister’s statement, dumping the currency to its weakest level since April 2009. This was despite him making light of the substantial depreciation by claiming that “almost all currencies in the region have softened against the US dollar since September 2014”.
Dato’ Seri Najib also tried to downplay the significance of the higher revised deficit target of 3.2%, by arguing that it was still lower than the 3.5% in 2014.
“In view of the external factors, we have to acknowledge that we may not be able to achieve the earlier fiscal target of 3% of GDP as announced,” said Najib. “Of importance is our commitment to continue reducing the fiscal deficit from 3.5 of GDP.”
International Fitch Ratings agency didn’t buy the Finance Minister’s optimism and responded instantly that “the Negative outlook indicates that Fitch is more likely than not to downgrade the rating of the sovereign.”
Clearly, the Budget 2015 revision and policy adjustment announcement by the Prime Minister fell far short of what was necessary to meet the challenges of the new financial landscape of low oil prices between US$40 to US$50 per barrel.
While Dato’ Seri Najib may not be technically wrong that “we are not in a crisis”, the markets clearly thinks that we might get ourselves embroiled in one.
Hence, we call upon the Prime Minister to convene an emergency parliamentary session to debate the revisions to the 2015 Budget so that the Cabinet can adopt stronger and better thought strategies to avert an impending economic crisis.
