Malaysia's economic outlook is expected to deteriorate significantly in 2015 following three years of robust growth, and experts say it's not just due to crashing oil prices.

Sharp currency depreciation and the introduction of a goods & services tax (GST) are widely expected to drag 2015 gross domestic product (GDP) growth below 5 percent from an estimated 5.8 percent in 2014.

The dramatic decline in crude is also playing a role for emerging Asia's only major energy exporting economy. Brent's 54 percent plunge over the past six months has noticeably hurt Malaysia, where petroleum products and liquefied natural gas account for 14 percent of exports.

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Barclays recently reduced its 2015 GDP forecast to 4.5 percent from 5.5 percent following a similar downgrade by the World Bank to 4.7 percent, both well below the government's 5-6 percent growth forecast.

Upbeat November trade data on Wednesday showed Malaysia's trade surplus at a three-year high but failed to improve the country's outlook. According to ANZ, the trade balance could potentially be an "Achilles' heel" in 2015 due to pressure from lower oil prices.

The Malaysian ringgit (Exchange: MYR=) weakened to its lowest level against the U.S. dollar since July 2009 this week, chalking up losses of over 12 percent in the past six months. The pair is currently trading around 3.5580, within striking distance of 3.60 and not far from 3.70, a level not seen since the Asian Financial Crisis.

"I don't think there's a lot of optimism or hope for relief in the short-term. On a relative value basis, it looks attractive on the short side," Todd Elmer, currency strategist at Citi, told CNBC on Wednesday.

Capital outflows on prospects of a U.S. interest rate hike this year are weighing on the ringgit, according to experts. With foreign reserves dropping from $134.9 billion in 2013 to $120.7 billion as of December, officials have requested that government-linked companies scale back foreign investments in order to contain outflows, Barclays noted.

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Prime Minister Razak is expected to introduce a GST tax of 6 percent in April, which could add 1.2 percentage points to headline inflation and weigh on discretionary spending, according to Barclays.

The tax also led the bank to lower its 2015 inflation forecast to 2.6 percent, from 3.8 percent - significantly below the government's 3-4 percent forecast.

Moreover, Barclays notes that concerns about the government's 3 percent fiscal deficit target in 2015 have increased despite proactive measures like the GST and deregulation of fuel prices. The group believes the government may need to further reduce expenditure to achieve its target.

Reports that quasi sovereign wealth fund 1Malaysia Development (1MDB) missed a payment of $560 million loan due at the end of December for the second time added to Malaysia's woes.



With Prime Minister Najib Razak chairing its advisory board, the state investor firm was the latest catalyst for worries over Malaysia's financial stability. The opposition party's national publicity secretary said 1MDB's failure to repay the loan would hurt the financial health of Maybank and RHB Bank, two of the country's biggest banks and 1MDB's primary lenders, according to local media.

"Some partial good news [in this matter] is that if they are overseas assets, they can be repatriated back. It will reel in a lot more ringgit so 1MDB can pay off the ringgit denominated obligations," Vishnu Varathan, senior economist at Mizuho Bank, told CNBC.

"However, the dollar liabilities may become a huge issue so the government may be under constraint as to how to dish out the now constrained budget," he added.