Ratings show agencies upbeat over reforms, says Guan Eng

Finance Minister Lim Guan Eng says sceptics on the economy have been proven wrong.

PETALING JAYA: Finance Minister Lim Guan Eng says Fitch’s reaffirmation of Malaysia’s A- rating and a similar rating by S&P Global show credit rating agencies are convinced of the government’s institutional reforms.

In a statement, Lim said Malaysia has surprised sceptics, who expected a downgrade due to legacy issues from the previous government.

But he said institutional reforms to enhance fiscal transparency and address high-profile corruption cases have convinced rating agencies to reaffirm Malaysia’s ratings.

“Fitch expects Malaysia’s institutional quality to improve further over time due to the wider implementation of open tender, fiscal transparency, anti-corruption measures and institutional reform measures to promote accountability and fiscal responsibility,” he said.

Lim also cited improvements to Malaysia’s press freedom and ease of doing business.

He said Fitch’s reaffirmation also proves the increase in direct debt had no adverse impact when the government’s overall debt and liabilities have been reduced as a percentage of the gross domestic product (GDP).

It was reported that the government’s total debt and liabilities as a ratio to GDP have been cut by 3.9% from 79.3% in 2017.

Former prime minister Najib Razak has criticised the Pakatan Harapan-led government over the increase in direct government debt to RM800 billion.

Lim said Fitch believes the government’s debt level relative to the GDP will gradually decrease over the next few years due to its clear fiscal consolidation plan.

He said another positive indicator for the Malaysian economy is the World Bank’s projection that it will expand 4.6% this year, along with a growth in wholesale and retail trade in the first five months of the year.

“Low inflation enjoyed by Malaysian consumers is sustaining strong consumption growth.

“In May, the consumer price index increased only marginally by 0.2% year-on-year, which is unchanged from the previous month.” he said.

Lim said Fitch is expecting a dip in semiconductor sales for the first half of the year as well as a drop in demand for capital goods and car sales.

However, he said the numbers are still positive, pointing to increased sales figures for local car makers Proton and Perodua.

He said the May figures for the Industrial Production Index and exports,also showed an increase.

“The May IPI grew 4.0% year-on-year beating market consensus of 3.5% as compiled by Bloomberg.

“Meanwhile, the unemployment rate has fallen to 3.3% in the same month, versus 3.4% in April. These positive developments point towards a sustainable GDP growth for the second quarter of 2019.”

Lim said the government will continue to pursue institutional reforms, maintain political stability and manage the reduction of debt and liabilities.