Fitch Ratings Affirms Malaysia’s Sovereign Credit Rating At ‘BBB+’ : Outlook Stable

The Government welcomes Fitch Ratings (Fitch) affirmation of Malaysia’s sovereign credit ratings at BBB+ with “Stable” outlook. The affirmation reflects the Government’s commitment to fiscal reform and the country’s ability to maintain economic growth momentum and withstand weak and volatile global conditions.

According to Fitch, “Malaysia’s ratings balance a diversified economy with strong medium-term growth prospects against high public debt, a low revenue base relative to the operating expenditures, and political considerations that may hinder long-term policymaking and reform implementation.”

Key highlights

• Fitch expects Malaysia’s real GDP growth to moderate to 4.0% in 2023 and 4.2% in 2024, amid improving political stability in the country. Fitch also anticipates weak global demand and trade restictions to undermine the country’s exports. However this is expected to be cushioned by resilient domestic demand, supported by growth in wages and investment activities.
• Fitch commended the country’s current account position, which continues to record surpluses for more than two decades and expects current account to remain in surplus in the medium term, notwithstanding external challenges. Fitch forecasts current account to slightly narrow to 2.6% in 2023 (2022: 3%) however pointed out that Malaysia is well-positioned to benefit from the global supplychain diversification due to the competitive manufacturing sector and significant FDI inflows since the re-opening of the economy in 2022.
• Fitch predicts that the Federal Government deficit will decline to 3.5% in 2025 amid subsidy rationalisation and the roll-out of the Global Minimum Tax.

The Government is committed to pursue fiscal consolidation and rebuild fiscal buffer for long-term sustainability. In the medium term, the Government is committed to reduce fiscal deficit from 5.6% in 2022 to 5.0% of GDP in 2023 as estimated, and subsequently to 4.3% in 2024. At the same time, Belanjawan 2024 maintains on expansionary fiscal stance with budgeted Development Expenditure of RM90 billion to support the momentum of domestic economic growth and meet the needs of the Rakyat.

Under the Ekonomi MADANI framework, the pace of fiscal consolidation will be further accelerated to achieve the medium term deficit target of 3% and fiscal reforms continues to be a priority to the Government. This is reflected in the recently approved Public Finance and Fiscal Responsibility Bill (FRA) by the Parliament last month. The FRA will institutionalise accountability and transparency in public finance for long-term fiscal sustainability and macroeconomic stability.

Moving forward, the Government is confident that the initiatives outlined in the Ekonomi MADANI framework and the rolling out of the measures under the various national plans, namely the National Energy Transition Roadmap, New Industrial Master Plan 2030 and the Mid-Term Review of the Twelfth Malaysia Plan will galvanise growth further.

Ministry of Finance Malaysia
Putrajaya
5 December 2023