KUALA LUMPUR: Malaysia’s “reasonably strong” gross domestic product (GDP) growth has remained its sovereign credit rating strength despite the impact of weaker external demand, says Fitch Ratings.
Although the country had been affected by a fall in revenue, it had not triggered a rating downgrade, said Fitch, pointing to the wave of 31 emerging market rating downgrades due to dependence on commodity export revenue. The Goods and Services Tax revenue from last year also provided support to non-oil revenue. Malaysia, which has been placed on an “A-” rating with stable outlook since the middle of last year, is likely to see a 3.4 per cent increase in revenue next year.
“Malaysia’s 2017 Budget points to further stability in public finances despite another decline in revenue from the oil and gas sector. It is better placed than many net commodity exporters to cope with the lingering effects of the negative shift in terms of trade,” said analyst Sagarika Chandra in a statement yesterday. Malaysia is the largest net exporter of petroleum and natural gas products in Southeast Asia.
It is estimated that oil and gas revenue will account for just 14.6 per cent of total revenue this year, down from 30 per cent two years ago. Dividends from national oil company Petroliam Nasional Bhd (Petronas) are forecast to fall to RM13 billion next year from RM16 billion this year and RM29 billion in 2014.
Fitch expects the economy to grow by around four per cent this year and next year, which comes at the bottom end of the government’s four to five per cent target range for next year but above the median of Malaysia’s rating peers. “Capital expenditure has fallen in the oil and gas sector, particularly at Petronas, but the impact on GDP growth has been partly offset by increases in consumer spending.” Sagarika said household spending continues to be supported by a hike in public-sector salaries that took effect from July 1, and will receive another boost from a 26 per cent increase in transfers to lower-income households included in the 2017 Budget.
