5-12-2023 (KUALA LUMPUR) Fitch Ratings, the global credit rating agency, announced on Tuesday that it has affirmed Malaysia’s long-term foreign-currency issuer default rating (IDR) at “BBB+” with a stable outlook. The rating reflects the country’s diversified economy with strong medium-term growth potential, while considering challenges such as high public debt, a limited revenue base compared to operating expenditure, and political factors that may impede long-term policy-making and reform implementation.
In a statement, Fitch highlighted its expectations for Malaysia’s real gross domestic product (GDP) growth to moderate to 4% in 2023 and 4.2% in 2024, following the post-pandemic rebound of 8.7% witnessed in 2022. The agency noted that Malaysia’s exports could face headwinds due to weak global demand and trade restrictions. However, Fitch expressed optimism about resilient domestic demand, supported by wages and increased investment activity.
Fitch also projected a further decline in Malaysia’s general government deficit, estimating it to reach 3.5% in 2025. This decrease is expected to result from subsidy rationalization efforts and the implementation of the global minimum tax. Additionally, the agency forecasted a narrowing of the general government deficit to 2.8% of gross domestic product (GDP) in 2025, compared to an average of 5.2% of GDP recorded during the period of 2020-2022. It also predicted a slight decrease in general government debt, with a projection of 72.3% of GDP in 2023, down from 72.8% in 2022.
Regarding Malaysia’s current account surplus, Fitch estimated a decline to 2.6% of GDP in 2023 from 3% in 2022. The agency highlighted Malaysia’s advantage in benefiting from global supply-chain diversification due to its competitive manufacturing sector. It also acknowledged a noticeable increase in foreign direct investment (FDI) inflows since the reopening of the economy in 2022.
