Posted on 03 Nov 2015
"The outlook on the ratings is stable on both scales," said Ram Ratings Sdn Bhd in its latest Asean Sovereign Focus publication which discussed the key sovereign-rating highlights of all 10 Asean countries.
"The sovereign rating is about the ability and willingness of the government to meet its debt obligations. The government's track record of meeting its fiscal consolidation targets and the successful execution of fiscal reforms feature prominently in our rating assessment", said RAM's head of sovereign ratings Esther Lai.
She highlighted that the implementation of GST, abolition of fuel subsidies and raising toll rates are among notable fiscal measures that underpin the Malaysian government's commitment to strengthening fiscal sustainability.
The report noted that the Malaysia's growth is slowing to an expected 4.9% this year and 4-4.5% for 2016, but the economy is still resilient.
It noted that the economy expanded 5.3% in H1'2015, and at that rate, Malaysia stands out in comparison to Thailand (2.9%) and Indonesia (4.7%).
RAM said the narrowing current-account surplus has heightened external sensitivities, and reserves, although depleting, are still sufficient to support about seven months of retained imports.
However, it noted that external liquidity risks are moderated by Malaysia's persistent current-account surpluses, high domestic savings and deep capital markets.
"From a broader perspective, Malaysia's rebalancing in recent years, with domestic demand being the economic driver, and its diversity have helped boost external resilience and support growth at a level higher than Indonesia, which has encountered various obstacles in reforms to move away from extractive commodities", Lai added.
However, Ram noted that political developments in the country warrant careful assessment for Malaysia's sovereign ratings.
"The risk of politics undermining effective policy making would be negative for the ratings, although there are no imminent such signs at this juncture," it said.
RAM's Asean Sovereign Focus is the point of reference for credit views on all 10 Asean nations.
