Fitch affirms Malaysia’s credit rating at ‘A-’

KUALA LUMPUR: Fitch Ratings has affirmed Malaysia’s long-term foreign-currency issuer default rating at ‘A-’ with a stable outlook, as it expects the positive growth momentum to continue this year and in 2019 under its baseline of a strong external environment.

The rating agency forecast Malaysia’s economy to grow 5.4 per cent in 2018 and 2019, supported by domestic and external demand.

Fitch said Malaysia’s current account surplus widened to three per cent of gross domestic product (GDP) last year from 2.3 per cent in 2016, driven mainly by a pick-up in electronics exports.

“We expect export growth to moderate slightly in 2018, as positive base effects dissipate, but to remain strong, consistent with favourable global demand conditions.

“We expect the current account surplus to be around two to three per cent of GDP in 2018 and 2019,” it said in a statement yesterday.

Nevertheless, it added, given Malaysia’s high degree of trade openness, the country would be vulnerable to negative external developments, such as increased trade protectionism, as would other open economies, it cautioned.

As for fiscal deficit reduction, the credit rating agency said it has been consistent with targets.

Malaysia’s Federal government deficit narrowed further to three per cent of GDP in 2017, in line with the government’s target for the year, from 3.1 per cent in 2016.

“Although we expect Fderal government expenditure to increase ahead of the general election, we believe the 2018 deficit target of 2.8 per cent of GDP will be met.

“We expect the deficit to narrow further to 2.8 per cent of GDP in 2018, and Federal government debt to decline to slightly under 50 per cent of GDP,” said Fitch.

The agency was of the opinion that the government’s mediumterm target of achieving a nearbalanced budget by 2020 would require a significant step-up in fiscal consolidation efforts in 2019 and 2020.

On the upcoming general election, the agency said it was unlikely to lead to a major shift in the direction of economic policy.

On the the banking sector, it said the trends remained stable with capitalisation levels staying sound with liquidity and funding conditions continuing to be favourable. — Bernama