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KUALA LUMPUR (Bernama) – The review of Malaysia’s rating by Fitch Ratings is mainly due to the negative impact of the COVID-19 pandemic on the country’s fiscal position and the current domestic political situation, said Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz. .
He expressed the government’s disappointment with the rating result, particularly in light of the current exceptional circumstances when the COVID-19 pandemic is still unfolding.
He said Malaysia has already started to see the green shoots of economic recovery, attributed to the various stimulus packages implemented by the government since March 2020.
“By focusing on Malaysia’s fiscal position and political situation, Fitch’s decision does not give due justice or credit to our crisis response efforts and our strong economic fundamentals,” it said in a statement.
Fitch said today that it has downgraded Malaysia’s sovereign rating from ‘A-‘ to ‘BBB +’, with an improved outlook from negative to stable.
According to Tengku Zafrul, credit rating agencies have taken more than 220 negative rating actions since the beginning of March, with more than 100 sovereign downgrades as lawmakers take urgent and vital measures to protect lives and livelihoods.
Governments around the world have committed US $ 11.7 trillion (US $ 1 = RM4.05) in economic stimulus packages, leading to an increase in fiscal deficits by an average of nine percent of domestic product gross (GDP), and global public debt is forecast to approach 100 percent of GDP by the end of 2020, it said.
At home, he said that strong economic fundamentals and decisive fiscal measures have enabled Malaysia to respond quickly, effectively and strategically to the challenging environment, while maintaining economic growth and resilience for the future.
The government has responded quickly and consistently to address the COVID-19 crisis with four stimulus packages worth RM305 billion or US $ 75 billion, roughly 20 percent of GDP to help people and businesses.
“These packages are expected to contribute more than four percentage points to GDP growth in 2020.
“The specific and temporary nature of the stimulus measures has helped limit the impact on the fiscal deficit,” he said.
He said the government had also halved its fiscal deficit from 6.7 percent of GDP in 2009 to 3.4 percent in 2019, and it is still expected to remain among the lowest within category A in 2020. .
Tengku Zafrul said Malaysia is poised for a strong recovery path in 2021 driven by the stimulus packages implemented this year, while the 2021 Budget, which is expected to contribute to projected growth of 6.5% to 7.5% % next year.
Malaysia’s credit position is also supported by its strong external position, backed by 22 years of constant current account surplus and substantial external assets held by banks and companies.
“In terms of liquidity, we are supported by deep and well diversified capital markets. Malaysian banks are now significantly more resistant to shocks compared to previous crises,” he said.
Meanwhile, Tengku Zafrul said the government takes note of Fitch’s concern regarding the domestic political situation.
“However, it is worth noting that key legislation has been passed in relation to the financing of COVID-19 measures, as well as for the protection of affected companies and individuals until 2022.
“The 2021 budget was also recently approved at the policy stage thanks to the government’s continued engagement with numerous stakeholders,” he said.
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