Finance Minister Lim Guan Eng says the government's fiscal consolidation is on track as it targets to reduce the deficit from 3.7% of GDP in 2018 to below 3% by 2021.
KUALA LUMPUR (Bernama): The affirmation of Malaysia's credit rating by Standard and Poor's (S&P) last week demonstrates its confidence in Malaysia’s positive economic outlook, strong institutional profile, sound economic fundamentals and prudent debt management, says the Finance Minister.
In a statement Sunday (July 7), the Finance Ministry (MoF) welcomed S&P Global Ratings’ affirmation of Malaysia’s issuer credit rating at A- with a stable outlook last week.
Lim Guan Eng said the reaffirmation also shows that the increase in the government’s direct debt does not affect Malaysia’s sovereign credit ratings, especially when the government’s overall debt and liabilities have been reduced.
He said one of the key drivers for the rating was Malaysia’s healthy growth prospects.
Additionally, despite the ongoing trade war between China and the United States, Malaysia’s exports have been rising above expectations for the second straight month due to trade diversions.
In May 2019, exports grew 2.5% to RM84.1bil from RM82.1bil a year ago, which is above the 2.2% market consensus as compiled by Bloomberg.
As a result of the continuous export growth, trade surplus for the first five months of 2019 rose by 4.3% to RM56.8bil, compared with RM54.5bil in the same period last year.
Approved foreign direct investment (FDI) across all sectors for the first quarter of 2019 rose 73.4% to RM29.3bil versus RM16.9bil a year ago.
The growth was driven by a 127% increase in approved manufacturing FDI, which rose to RM20.2bil from RM8.9bil a year ago.
"S&P acknowledges the government’s efforts to restore its finances through rigorous fiscal management, including managing overall debt and liabilities.
"Although the government’s direct debt rose to 51.2% of the gross domestic product in 2018 from 50.1% in 2017, it is only one component of the government’s overall debt and liabilities,” said Lim.
He added that other components were committed government guarantees and finance leases, as well as other liabilities including the 1MDB debt, which the government was compelled to service directly.
The recently established Debt Management Committee would build on these successes and ensure that the government’s debt management practices are in line with global best practices, he said.
"Furthermore, the Pakatan Harapan administration has made great strides in combating corruption, an institutional reform that is seen as a credit positive, on top of the country’s economic stability and strong financial institutions,” added Lim. - Bernama
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