KUALA LUMPUR: S&P Global Ratings expects the government to continue implementing prudent budgetary and economic policies and forecasts the economy will grow at an average rate of over 4% between now and 2020. The ratings agency said on Thursday it had also affirmed its “A-” long-term and “A-2” short-term foreign currency sovereign credit rating on Malaysia. At the same time, it affirmed its “A” long-term and “A-1” short-term local currency sovereign credit rating on Malaysia. “The outlook on the long-term rating remains stable. We also affirmed our ‘axAAA/axA-1+’ Asean regional scale rating on Malaysia,” it said. S&P pointed the stable outlook was based on its expectation that Malaysia’s strong external position and monetary flexibility would balance its relatively weaker, but improving, public finances over the next 24 months. “We believe Malaysia’s credit fundamentals can withstand further stress in the oil and gas sector during that period,” it said.
S&P said it might raise the ratings if stronger economic growth, combined with the government’s fiscal efforts, lead the government to reduce the level of public debt to GDP substantially, for example if the government started paying down outstanding public debt. However, it might lower the ratings if it assessed Malaysia’s public finances or institutional settings to have weakened. It also cautioned it might also lower the ratings if contingent liabilities increase substantially or crystallise on the general government’s own balance sheet. S&P pointed out that stocks of public and private debt, and contingent public liabilities were considerable, but overwhelmingly denominated in the domestic currency. “Uncertainty connected to upcoming parliamentary elections could put upward pressure on the cost of refinancing the economy’s gross external financing needs, despite Malaysia’s overall strong net external position,” it said.
