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Fitch downgrades Malaysia’s sovereign rating to BBB + for the first time
+A KUALA LUMPUR (Dec 4): Fitch Ratings downgraded Malaysia’s long-term foreign currency issuer default rating (IDR) to ‘BBB +’ from ‘A-‘ with a stable outlook.
The depth and duration of the Covid-19 crisis have weakened several of Malaysia’s key credit metrics, Fitch Ratings said in a statement today.
Fitch noted that the impact of the pandemic on the Malaysian economy has been substantial and has added to Malaysia’s tax burden, which was already high relative to its peers that entered the health crisis.
“The government has secured the passage of key legislation to implement relief measures, including the 2021 budget, but in Fitch’s view, the lingering political uncertainty after the change of government last March weighs on the policy outlook, as well as the prospects for further improvements in governance standards, ”Fitch said.
Additionally, Fitch expects Malaysia’s gross domestic product (GDP) to contract by 6.1% in 2020, before rebounding by 6.7% in 2021 due to base effects, a revival of infrastructure projects and a continued recovery of exports of manufactured goods and raw materials.
Fitch, however, noted that these forecasts remain subject to uncertainty and depend on the short-term evolution of the pandemic, as illustrated by an increase in the number of daily cases since early October.
“We forecast growth of 4.6% in 2022, with the expectation that Malaysia’s diversified economy will generate strong growth in the medium term,” he added.
(More to come)
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