Malaysia to revise its budget again as oil drops to unprecedented level

State expenditure will be trimmed for the second year running.

Malaysia is going to revise its budget to account for much lower oil prices, according to a report by OCBC.

Malaysia's Prime Minister Najib reportedly said that the 2016 Budget will be recalibrated soon to reflect the current reality. Oil is yet again the main factor.

OCBC noted that the USD48/barrel oil price assumption that was adopted in the 2016 Budget looked rationally plausible when it was originally tabled in October last year.

Now, however, oil has been trading around USD33 – a good one-third below the assumed price – in the past few days.

"Our house forecast is for oil price to recover to $50/barrel by the end of the year, but it appears that the government would prefer not to take chances with that now-optimistic-looking trajectory and is planning to revise its budget for the year," OCBC said.