S&P Global affirms Malaysia's sovereign credit ratings

KUALA LUMPUR: S&P Global Ratings has affirmed its 'A-' long-term and 'A-2' short-term foreign currency sovereign credit ratings on Malaysia.

The ratings agency also affirmed its 'A' long-term and 'A-1' short-term local currency ratings on Malaysia.

"The stable outlook reflects our expectations that Malaysia's steady growth momentum and fiscal policy will allow modest improvements in fiscal performance over the next two to three years,” it said in a press released published on their website today.

As the Malaysian economy recovers from the pandemic-related slowdown, it believed its medium-term growth prospects are better than most of the other sovereigns at similar income levels.

"Although Malaysia's budget deficit remains high, we expect its growth dynamics to offset vulnerabilities associated with an elevated government debt stock and weak fiscal performance,” it said.

S&P Global Ratings said Malaysia's 2022 growth momentum has continued into 2023 with its first-quarter gross domestic product (GDP) rising 5.6 per cent year-on-year, underpinned by a further improvement in employment, recovery in tourism activity, and continued capital investments on both private and public fronts.

"Nevertheless, we expect full-year economic expansion to moderate to four per cent as a weakened global growth environment takes hold,” it said.

The ratings agency also said that Malaysia's 2023 budget remains expansionary to support growth momentum and alleviate inflationary pressures. Hence, we forecast Malaysia's net indebtedness to rise by 4.4 per cent of GDP in 2023 versus a 5.0 per cent increase in 2022 on moderately lower general and central government deficits, it said.

Meanwhile, it said Malaysia's solid external position remains a rating strength. The country has had consistent current account surpluses for more than two decades.

"We forecast the current account surplus will stabilise around three per cent of GDP over the next three years, driven by a gradual recovery in tourism and a continued strong demand for its manufacturing exports will support the country's trade accounts,” it said.

In addition, although its consumer price index (CPI) rose in 2022 to 3.4 per cent in line with higher global prices and supply-side constraints, it expects the CPI to come in at a modest 2.8 per cent by year-end due to the government's subsidies on fuel and food staples, it said. - Bernama