KUCHING: For Malaysia, crude oil and petro-dollar revenue is a major source of income for the government and therefore, vast fluctuation in the global commodity prices will have significant implications on full-year government revenue.
AmResearch Sdn Bhd (AmResearch) outlined this in a recent economic update report and noted, given the full-year average crude oil price assumption of US$55 per barrel, the government expects total revenue to amount to RM221.4 billion in 2015 versus its initial revenue forecast of RM235.2 billion.
“Under the revised Budget 2015, oil and petroleum-related sources are expected to constitute 21 per cent of total government revenue, compared with the original estimate of 26 per cent,” the research firm added.
Petroliam Nasional Bhd (Petronas), AmResearch noted, had agreed to a dividend payout of RM2 billion for the fourth quarter of 2014 (4Q14) which brings its full-year pay out to RM26 billion.
This accounts for 12 per cent of the estimated total revenue for 2015, compared to 13 per cent or RM29 billion in 2014.
To recap, last week, Petronas reported that it had incurred its first quarterly loss in at least five years for 4Q14.
“It posted a net loss of RM7.3 billion in 4Q14, mainly due to assets impairment losses as a result of the steep decline in global oil prices. Petronas had recorded a net profit of RM12.8 billion in 4Q13.
“The poor quarterly results dragged its full-year net profit lower by 27 per cent to RM47.6 billion in 2014.
“With that, Petronas said it will pay a dividend of RM2 billion for 4Q14, which brings the full-year payout to RM26 billion for 2015,” AmResearch said.
Aside from dividends, other oil and petroleum-related sources of government revenue include petroleum income tax, export duty of crude oil and petroleum royalty, the research firm added.
Meanwhile, earlier this year, Fitch Ratings had indicated that Malaysia’s dependence on petroleum-linked revenues remains a key sovereign credit weakness for the country.
To recap, Fitch has put Malaysia on a negative rating watch since July 2013 due to the government’s fiscal targets.
“The rating agency said that it is “more likely than not” to cut the country’s debt rating within the next 12 to 18 months.
“Fitch expects to conduct a full review of Malaysia’s ratings before the end of July 2015,” AmResearch said.
Aside from that, the research firm said, another credit weakness includes Malaysia’s rising contingent sovereign liabilities as according to Fitch, the financial position of 1Malaysia Development Bhd (1MDB) has become a source of uncertainty.
“Fitch views 1MDB as a close contingent liability of the sovereign because of the nature of its operations as well as explicit sovereign guarantees,” it concluded.