Fitch affirms Malaysia’s ratings, says country to benefit from supply-chain diversification
05 Dec 2023
Malaysia is well-positioned to benefit from the global supply-chain diversification with its competitive manufacturing sector, according to Fitch Rating.
The firm also noted that foreign direct investment (FDI) inflows had picked up noticeably since the reopening of the economy in 2022.
Fitch affirmed Malaysia’s long-term foreign-currency issuer default rating (IDR) at “BBB+” with a stable outlook.
“Malaysia has recorded current account surpluses for more than two decades and it expects the current account to remain in surplus in the medium term, despite near-term external challenges. We forecast the current account surplus to narrow to 2.6 per cent of gross domestic product (GDP) in 2023 from 3.0 per cent of GDP in 2022,” it said.
Meanwhile, Fitch Rating said the country’s medium-term fiscal framework projects an average government deficit of 3.5 per cent in 2024-2026.
The recently-passed Public Finance and Fiscal Responsibility Act mandates the federal government deficit to fall to 3.0 per cent of GDP in the next three to five years.
“We project the federal government deficit to further decline to 3.5 per cent in 2025 amid further subsidy rationalisation and the rollout of the global minimum tax,” it said.
In addition, the rating agency forecast the general government deficit to narrow to 2.8 per cent of GDP in 2025 from an average of 5.2 per cent of GDP in 2020-2022.
“We expect fiscal adjustments such as a broad and immediate removal of subsidies and the introduction of broad-based consumption taxes to be politically challenging in the near term, as the government balances interests within the ruling coalition and seeks to garner support from voters,” it added.
Source: NST
