Moody’s cred­its coun­try’s well-de­vel­oped in­fra­struc­ture, nat­u­ral re­sources and eco­nomic com­pet­i­tive­ness, among oth­ers

New Straits Times - - Front Page - RUPA DAMODARAN KUALA LUMPUR ru­pa­banerji@me­di­

MOODY’S In­vestors Ser­vice ex­pects Malaysia to grow faster than all other “A-rated” coun­tries through 2020.

This was due to its well-de­vel­oped in­fra­struc­ture, sub­stan­tial nat­u­ral re­sources and the di­ver­si­fi­ca­tion and com­pet­i­tive­ness of its econ­omy, it said.

Malaysia’s large ser­vices sec­tor and well-de­vel­oped man­u­fac­tur­ing base, es­pe­cially in elec­tron­ics, had helped to off­set the terms of trade shock posed by the down­turn in global prices for key com­mod­ity ex­ports, Moody’s added.

Malaysia’s ex­po­sure to ex­ter­nal de­mand as mea­sured by the sum of ex­ports and im­ports of goods and ser­vices, which nearly ap­proached 130 per cent of the gross do­mes­tic prod­uct (GDP) last year, left it vul­ner­a­ble to swings in global trade, it added.

Malaysia’s fis­cal strength had weak­ened since a year ago due to lower rev­enue, which in turn af­fected the other fis­cal met­rics.

But de­spite its large debt bur­den, only 3.3 per cent of di­rect gov­ern­ment debt was de­nom­i­nated in for­eign cur­rency at the end of last year, with most be­ing syariah-com­pli­ant US dol­lar is­sues.

Malaysia is likely to achieve a ro­bust growth of 4.3 per cent this year and next year, on the back of cur­rent ac­count sur­pluses.

But the near-term out­look faces risks from a rise in trade pro­tec­tion­ism and spillover from a slow­down in im­ports from China.

“Con­tin­ued fis­cal ex­pen­di­ture re­straint and the po­ten­tial im­pact of a weaker ring­git on busi­ness sen­ti­ment and im­ported in­fla­tion could weigh on do­mes­tic de­mand,” it warned.

On the other hand, com­mod­ity prices for petroleum, nat­u­ral gas, and palm oil have be­come more sup­port­ive in re­cent months and could pos­si­bly foster ex­ports, as well as ac­com­mo­date greater fis­cal spend­ing.

Moody’s main­tained its “A3” sta­ble out­look on Malaysia, say­ing the re­silient econ­omy pro­vided bal­ance against struc­tural fis­cal chal­lenges due to lower rev­enue.

It said the rat­ing ac­tion could be pos­i­tive if gov­ern­ment debt met­rics im­proved with a lower fis­cal deficit to the GDP.

Moody’s ex­pects to see some im­prove­ment in gov­ern­ment debt to GDP ra­tio this year with fis­cal con­sol­i­da­tion ef­forts and eco­nomic growth.

It ex­pects less cur­rency volatil­ity and some ac­cu­mu­la­tion of for­eign ex­change re­serves due to new for­eign ex­change ad­min­is­tra­tion rules by Bank Ne­gara Malaysia.

“None­the­less, Malaysia re­mains well-po­si­tioned with re­gard to other mea­sures of its ca­pac­ity to ser­vice ex­ter­nal debt,” it said.

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