KUALA LUMPUR: Malaysia on Tuesday cut its economic growth forecast for this year and announced a slew of austerity measures after tumbling oil prices forced the government to slash spending.

Prime Minister Najib Razak said the government's 2015 budget, announced in October, was based on oil prices averaging $100 a barrel but this projection was no longer realistic as global crude prices have dropped by over 50 percent. State oil company Petronas contributes about a third of Malaysian government revenue.

Najib, who is also finance minister, said the government lowered its oil price forecast to $55 a barrel, which will lead to a revenue shortfall of 8.3 billion ringgit ($2.3 billion) despite savings from the removal of fuel subsidies last month.