KUALA LUMPUR: Fitch downgraded Malaysia's sovereign credit rating to BBB+ from A- with a stable outlook, noting that the government's swift response to the Covid-19 pandemic and material relief measures have added to the country's fiscal burden.
Credit rating agencies have taken over 220 negatives rating actions since early March, with more than 100 sovereign downgrades.
"Measures to contain the domestic spread of the coronavirus, combined with weak investment and low tourism receipts due to the pandemic, have reduced economic activity, as it has in many countries globally," the rating agency said.
Fitch acknowledges Malaysia's swift response to the crisis, with material relief measures for affected individuals and businesses.
"Nevertheless, the impact on Malaysia's economy has been substantial, and has added to Malaysia's fiscal burden, which was already high relative to peers going into the health crisis," it said.
Fitch expects GDP to contract by 6.1% in 2020, before rebounding by 6.7% in 2021 due to base effects, a revival of infrastructure projects and an ongoing recovery of exports of manufactured goods and commodities.
"We forecast growth of 4.6% in 2022, on expectation that Malaysia's diversified economy will deliver strong medium-term growth," it said.
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