‘Malaysia’s recovery path still fragile’
KUALA LUMPUR: Malaysia’s path to a full economic recovery will remain uneven and fragile this year, and will depend on the success of country’s vaccination programme and the global outlook.
RAM Rating Services Bhd (RAM Ratings) said swift execution of the programme and no further outbreaks might lend an upside to Malaysia’s economic recovery and the rating agency’s gross domestic product (GDP) growth forecast, which stands at five per cent for this year.
RAM Ratings released its latest annual corporate default and rating transition study, which provides an update on the credit performance of the rating agency’s rated portfolio, last year.
The report noted that Malaysia ended 2020 with one of its worst recessions. GDP growth contracted 5.6 per cent — the steepest drop since 1998, due to the rapid global spread and severity of the Covid-19 pandemic. To contain the outbreak, Malaysia had implemented lockdowns and mobility restrictions that exacted a toll on the economy.
Demand for non-essential services and goods plummeted, resulting in job losses and financial strain for many businesses, said RAM Ratings.
It also said that as at end-January, the government had launched up to RM320 billion of fiscal stimulus packages and financial relief measures to help households and businesses contend with the economic fallout. These, including higher allocations for big-ticket infrastructure projects, have shored up the financial markets, as have record low-interest rates.
RAM Ratings said the domestic corporate bond market kept up its momentum last year, with RM104.6 billion of gross bond/sukuk issuance — at par with the preceding year’s RM105.3 billion. The bond/sukuk pipeline spiked up in the fourth quarter of last year as companies took refinanced or locked in cheap funding.
“Our broader analysis of corporates in Asean-6 (Asean-5 + Vietnam) reveals that Malaysian firms have stronger debt protection metrics than their Asean peers. Although half of the companies listed on Bursa Malaysia reported weaker earnings in the third quarter of last year, their debt protection metrics remained intact.”
The firm said Malaysian firms had enough cash to support 3.5 months’ operating expenses.
Relative to RAM Ratings’s benchmarks and ASean peers, these metrics are not aggressive.
Recent sample data for the fourth quarter of last year’s results indicate improvements in these measures for Malaysia and Asean-6, it said.
Although half of the companies listed on Bursa Malaysia reported weaker earnings in the third quarter of last year, their debt protection metrics remained intact.