KUALA LUMPUR: Malaysia has the potential for a sovereign rating upgrade, supported by continuously narrowing fiscal deficits, S&P Global Ratings said.
Its managing director and sector lead for sovereign ratings, Kim Eng Tan, however, said an upgrade is unlikely in the near term due to the ongoing global supply crisis, despite a stable economic outlook.
He said this is due to Malaysia’s external metrics, which measure foreign assets against foreign liabilities, appearing somewhat weaker than expected, given Malaysia’s current account surplus.
"I think to some extent that reflects a lot of foreign investment in the domestic bond market, which is highly valued by many foreign investors, because they say that the Malaysian domestic bond market is very well developed compared to peers and so on.
"But one of the outcomes of that strong investment in Malaysian government securities is that it actually weakens the external metrics that we look at. Now, if these metrics were to improve, it could potentially, in a material and sustainable way, help to improve Malaysia’s credit metrics," he said at the S&P-RAM Forum 2026 today.
Tan was a panellist in a session titled "From Tariff Shocks to Energy Shocks: Policy Making in a Multipolar Reality”.
Last year, S&P reaffirmed Malaysia’s sovereign credit rating at ‘A-’ with a stable outlook, despite significant uncertainty in global trade flows.
The agency said the performance reflected confidence in Malaysia’s macroeconomic management, supporting stronger growth prospects than most sovereigns at similar income levels.
Meanwhile, Tan said the rapid growth of the Malaysian economy could support a future upgrade.
"If fiscal performance improves and the deficit starts coming down to below 2.0 per cent, and hopefully even below 1.0 per cent, then I would say there is a decent case for higher ratings," he said.
S&P Global Ratings and RAM Rating Services Bhd jointly hosted the forum, bringing together policymakers, investors and industry leaders to examine how markets are repricing risk amid heightened global uncertainty.
The event carried the theme "Pricing Risks, Seizing Opportunities”, reflecting a shift in how capital market participants assess volatility, recalibrate strategies and position for growth. - Bernama
