RAM reaffirms Malaysia’s global, Asean-scale sovereign ratings

The agency said Malaysia’s ratings remained constrained by high government and household debt levels.

Its head of sovereign ratings, Esther Lai, said the country’s economy was forecast to expand at a marginally faster pace of 4.5% in 2017 from an estimated 4.2% in 2016, underpinned by growing private domestic demand and a diversified economic structure.

“This pace of economic activity remains resilient despite various growth headwinds, which include the increase in prices of various consumer goods, persistent depreciation of the ringgit and heightened global risk aversion to emerging markets,” she said.

Meanwhile, RAM said, Malaysia’s current account surplus was expected to remain in surplus at 1% of gross domestic product (GDP) in 2017 (2016 estimate: 1.3%), attributable to sustained demand for capital imports and low oil prices.

On the Federal Government debt, RAM said, it was expected to decline to 52% of GDP in 2017 from 53.4% in September 2016 due to fiscal consolidation efforts and the transfer of debt off balance sheet.

The agency said the adjusted government debt, which included debt (both guaranteed and non-guaranteed) issued by strategic public sector entities, was estimated to reach 66.4% of GDP by end-2016.

“This level is higher than that of regional peers and is a key moderating factor of the ratings.

“That said, the debt structure remains favourable, as most of the papers are denominated in ringgit (96.5%) and are generally long-tenured,” it said.

It said amid the still volatile external conditions, Malaysia’s ratings could be revised downwards if its fiscal position deteriorated as a result of rising on and off balance sheet debt.

“Similarly, the ratings could face pressure if there is a persistent current account deficit or if there are significant deviations in the country’s economic or fiscal reforms,” it said. – Bernama

Source : The Star