KUALA LUMPUR — March 28, 2018: 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.
It forecasts Malaysia’s economy to grow 5.4 per cent this year and next, supported by domestic and external demands.
According to Fitch, 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 today.
Nevertheless, given Malaysia’s high degree of trade openness, the country will be vulnerable to negative external developments, such as increased trade protectionism, as would other open economies, it cautioned.
As for fiscal deficit reduction, Fitch said it has been consistent with targets.
Malaysia’s 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 federal government expenditure to increase ahead of the general elections, we believe the 2018 deficit target of 2.8 per cent of GDP will be met.”
Fitch also expects the government debt to decline to slightly under 50 per cent of GDP.
The agency was of the opinion that the government’s medium-term target of achieving a near-balanced budget by 2020 would require a significant step-up in fiscal consolidation efforts in 2019 and 2020.
The agency doesn’t expect the general elections to lead to a major shift in the direction of economic policy.
On the the banking sector, it said the trends remain stable with capitalisation levels staying sound with liquidity and funding conditions continuing to be favourable. — Bernama