‘Malaysian growth prospects still healthy’

There are several mitigating features against these external vulnerabilities, among them a sizeable surplus on the net international investment position which acts as a cushion and a large domestic institutional investor base which also provides supportive demand, at least for local currency debt, should foreign investors’ appetite for Malaysian assets diminish, Moody’s said.

On growth prospects, the ratings agency said the country had healthy and resilient growth prospects with a highly diversified and competitive economic structure.

“Growth’s resilience through external headwinds, such as the fall in commodity prices and oil prices and a tumultuous political climate, is a testament to the economy’s shock absorption capacity.

“Between 2012-2021, we expect GDP growth to average 5.1 per cent, making Malaysia one of the fastest growing A-rated sovereigns, surpassed only by China, Ireland, and on par with Malta,” it added.

In conclusion, Moody’s said in the absence of further reform, it is expected that the government’s demonstrated commitment to fiscal consolidation will only result in limited improvement on Malaysia’s public indebtedness and debt affordability.

However, it said a robust growth path, which provides the base for an expansion in nominal GDP, lends stability to this debt burden.

While a large foreign investor presence and exposure to commodity-related exports leaves the external position vulnerable to broader shifts in interest rates and global commodity price movements, underlying mitigating factors, including Malaysia’s deep domestic capital markets and strong external position, cushion the impact of such volatility, it added. — Bernama

During t the event,Tan says that BNM willundertake dertake a study jointly with the World Bank ne next year to provide more visibility on h how costly cash is as an instrument. — Bernama photo