Xinhua, Kuala Lumpur :
While high debt burden has become a challenge for the new Malaysian government, economists believe the country’s strong macro fundamentals and external finances will continue to support its rating profile.
“It is unlikely that international rating agencies will adjust on
Malaysia’s sovereign rating outlook to negative (from stable) in the near to medium term,” said Affin Hwang Capital in a report Friday, citing Malaysia’s improving economic outlook, sustainable current account surpluses, and steady increase in foreign exchange reserves.
Malaysian Ministry of Finance on Thursday confirmed that the federal government debt and liabilities account for 80.3 percent of Malaysia’s Gross Domestic Product (GDP) as of December, 2017.
The debt burden has raised concerns of ratings downgrade when some rating agencies have already warned that the country might not able to achieve its deficit target this year after the abolishment of the 6-percent Goods and Services Tax (GST).
Affin Hwang Capital, however, noted that a majority of the government guarantees debts are borne by government-linked companies and statutory bodies, which may have their own source of revenue to serve their debt obligations.
Besides, an advisory council set up by Malaysian new government has earlier met with the three key sovereign rating agencies, Moody’s Investors Service, S&P Global Ratings and Fitch Ratings, to explain on the country’s fiscal deficit position.
Affin Hwang Capital also believes that the new government is able to improve on its fiscal position going forward, and remains committed toward fiscal discipline and consolidation.
The new Malaysian government has indicated earlier that it is confident on its economic reform. It has recently announced several measures to cut the government expenditures, such as a 10-percent pay cut for ministers and downsizing public sector.
The GST removal, which will be effective next month, will also be replaced by a 10-percent sales and services tax that will be re-introduced by this year.
While high debt burden has become a challenge for the new Malaysian government, economists believe the country’s strong macro fundamentals and external finances will continue to support its rating profile.
“It is unlikely that international rating agencies will adjust on
Malaysia’s sovereign rating outlook to negative (from stable) in the near to medium term,” said Affin Hwang Capital in a report Friday, citing Malaysia’s improving economic outlook, sustainable current account surpluses, and steady increase in foreign exchange reserves.
Malaysian Ministry of Finance on Thursday confirmed that the federal government debt and liabilities account for 80.3 percent of Malaysia’s Gross Domestic Product (GDP) as of December, 2017.
The debt burden has raised concerns of ratings downgrade when some rating agencies have already warned that the country might not able to achieve its deficit target this year after the abolishment of the 6-percent Goods and Services Tax (GST).
Affin Hwang Capital, however, noted that a majority of the government guarantees debts are borne by government-linked companies and statutory bodies, which may have their own source of revenue to serve their debt obligations.
Besides, an advisory council set up by Malaysian new government has earlier met with the three key sovereign rating agencies, Moody’s Investors Service, S&P Global Ratings and Fitch Ratings, to explain on the country’s fiscal deficit position.
Affin Hwang Capital also believes that the new government is able to improve on its fiscal position going forward, and remains committed toward fiscal discipline and consolidation.
The new Malaysian government has indicated earlier that it is confident on its economic reform. It has recently announced several measures to cut the government expenditures, such as a 10-percent pay cut for ministers and downsizing public sector.
The GST removal, which will be effective next month, will also be replaced by a 10-percent sales and services tax that will be re-introduced by this year.
