PETALING JAYA: S&P Global Ratings (S&P) has affirmed Malaysia’s foreign currency and local currency long-term issuer ratings at A- and A, respectively, with a negative outlook.
In a statement, the Finance Ministry said the affirmation is testament to the country’s strong external position, monetary policy flexibility, recognised track record of supporting sustainable economic growth as well as economic resilience during times of uncertainty. Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the affirmation demonstrated S&P’s confidence in Malaysia amid unprecedented credit rating pressures globally, where approximately 20% of all sovereigns with negative outlooks as at end of 2020 have been downgraded by the three main credit rating agencies.
“The government remains committed to the country’s medium-term fiscal consolidation and sustainability. Over the past decade, the fiscal deficit was successfully reduced from 6.7% (2009) to 3.4% (2019) of gross domestic product (GDP),” he said.
“Guided by the medium-term fiscal framework, the estimated fiscal deficit of 6% this year is expected to decrease to an average of 4.5% between 2021 and 2023, based on the assumption of higher crude oil prices, as well as the reduced requirement for pandemic-related fiscal support,” he added.
This would also be supported by the gradual implementation of the medium-term revenue strategy which aims to enhance and diversify the country’s revenue base, he said.
“To this end, Malaysia is also formulating the Fiscal Responsibility Act to improve fiscal prudence, governance and transparency based on global best practices,” he noted.
According to Tengku Zafrul, solidifying Malaysia’s rating strength is its strong credit standing, supported by a resilient external position and well-developed domestic bond market. Malaysia has consistently registered a current account surplus over the past two decades with its largest ever trade surplus of RM184.8bil in 2020, equivalent to 4.2% of GDP.
This is supported by adequate international reserves, large external assets held by banks and corporates, as well as net foreign currency external asset position of RM1.1 trillion or 77% of GDP as at end-March 2021.
“Together with a floating foreign-exchange regime, these factors underpin Malaysia’s ability to withstand external shocks. Reinforcing Malaysia’s external resilience is its highly liquid and deep domestic bond market, with healthy external demand for its sovereign debt,” said Tengku Zafrul.