In a sign of confidence for Malaysia’s capital markets, Fitch Ratings has affirmed its “stable” outlook for the country with an “A-”rating.
In a statement yesterday, the international ratings firm said the recent Budget 2016 recalibration showed that the Government has remained committed to fiscal consolidation.
“We view the macroeconomic assumptions made in the Budget as broadly realistic, with oil prices expected to average US$30-35 (RM130-148) per barrel this year while the country’s gross domestic product (GDP) is projected in the range of 4% to 4.5%,” it said.
Fitch added that it expected the ratio of government debt to GDP to rise modestly up until 2017 but to remain below the Government’s self-imposed 55% ceiling.
Going forward, the firm expects Malaysia to record a GDP of about 4% in 2016 and 2017, below the five-year average of 5%.
The ringgit’s decline as well as plummeting global oil prices last year coincided with capital outflows from Malaysia, putting pressure on its external finances last year, Fitch said.
“However, the decline in the ringgit has supported non-commodity exports, while the Government and state-owned enterprises expect to continue with strategic investment projects,” it said.
Fitch noted that Malaysian politics and governance standards came under the spotlight due to a range of domestic and international investigations into state-owned company 1Malaysia Development Bhd (1MDB).
“However, the political heat generated by these issues has not so far had a discernible impact on policy-making. For example, the Government has pressed ahead with controversial structural fiscal reforms, including a goods and services (GST) tax and the reduction in fuel subsidies,” it said.
Meanwhile, Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz lauded the rating affirmation by Fitch as a sign of improving market fundamentals in Malaysia.
“In this period of uncertainty, it is positive that the rating is unchanged, which underscored Malaysia’s high degree of resilience.
“Despite the challenging landscape, the policies put in place and the measures that have been taken have positioned us well to withstand the challenges,” she told reporters following a ground-breaking ceremony at the site of the new Asian School of Business in Kuala Lumpur yesterday.