KUALA LUMPUR: S&P Global Ratings has affirmed Malaysia’s sovereign credit ratings with a stable outlook, citing steady economic growth prospects, ongoing fiscal consolidation and a well-diversified economy.
The rating agency, in a statement, affirmed its ‘A-’ long-term and ‘A-2’ short-term foreign sovereign currency ratings, as well as its ‘A’ long-term and ‘A-1’ short-term local currency ratings.
The transfer and convertibility assessment was maintained at ‘A+’, it said.
S&P said near-term headwinds from uncertainty in global trade flows could slow growth in Malaysia over the next one to two years.
That said, economic growth prospects remain better than that of most other sovereigns at similar income levels, supported by a well-diversified economy.
S&P said continued political stability underpins a conducive policymaking environment that is enabling the gradual consolidation of government finances, while noting that Malaysia’s external position remains highly sensitive to global trade policy developments.
“The stable outlook reflects our expectation that Malaysia's growth momentum and prevailing policy environment will allow modest improvements in fiscal performance over the next two to three years,” it said.
S&P said it may lower Malaysia’s ratings if the trend growth rate in real gross domestic product (GDP) per capita falls to levels comparable with peers, or if political stability weakens to the point where policymaking becomes materially less predictable.
On the upside, the ratings could be raised if fiscal outcomes outperform forecasts, supported by continuing political stability and a sustained narrowing of deficits to below 3% of GDP.
S&P said a concomitant decline in government net debt to below 60% of GDP, or interest payments to below 10% of government revenues, would also indicate upward pressure on the ratings.
“We could also raise the ratings if Malaysia's external settings improve from current levels, including a significant decline in the ratio of gross external financing needs to current account receipts and usable reserves to well below 100% on a sustained basis,” it said.
It said Malaysia's consistently strong economic growth and high degree of monetary policy flexibility underpin its ratings. In addition, its external position is balanced, characterised by moderate current account surpluses and a large export base.
“We forecast Malaysia's 2025 growth will moderate to 4.2%, following a solid 5.1% outturn in 2024, as external trade headwinds dampen near-term momentum.
“Malaysia's highly trade-oriented economy is vulnerable to a slowdown in regional and global trade flows, as well as to a potential reduction of exports, following the imposition of a 19% tariff on some goods exports to the U.S. since Aug. 7, 2025,” S&P said.
The rating agency projected Malaysia’s economy to expand by an average 4.4% annually over 2025–2028, lifting its 10-year weighted-average per capita GDP growth to 3.3%, above the global median for peers at similar income levels.
It estimated GDP per capita at close to US$14,000 in 2025, which remains below most sovereigns in the same rating category.
Additionally, S&P expects the Malaysian government to gradually narrow its fiscal deficit in the coming years, supported by adjustments to subsidy schemes and new revenue measures.
The government plans to rationalise its petrol subsidy framework, and has already implemented reforms to diesel, electricity, water, and food subsidies.
On the revenue side, the government broadened its sales tax and service tax (SST) framework in July 2025, plans to introduce a new tax on dividend income, and will continue work on improving introduced a tax on dividend income, and is continuing efforts to strengthen the administration of current tax policies.
“We forecast the net indebtedness of Malaysia's general government will increase by an average of 3.5% of GDP annually over 2025-2028,” S&P said.
