Malaysia’s real GDP growth is expected to slow to 4.7% this year and 4.5% in 2020 after averaging around 5% from 2015-18, said Moody’s Investor Services.
Moody’s said external headwinds from trade protectionism would weigh on trade activity, while a review of infrastructure projects and slowing public spending would prove a further drag on growth.
“Economic expansion will still stay stronger than the median average for A-rated sovereigns, even taking moderating growth into account.
“Malaysia’s (A3 stable) credit profile reflects the country’s large and diversified economy with healthy medium-term growth prospects and relatively high government debt that is partly offset by a favourable debt structure and large domestic savings,” it said in a statement yesterday.
Moody’s said its conclusions were contained in its recently released credit analysis titled “Government of Malaysia — A3 stable: Annual credit analysis”.
The international rating agency said the Malaysian government’s recent fiscal policy choices, especially the abolishment of the Goods and Services Tax, would narrow its revenue base and reduce fiscal flexibility.
Moreover, it said Malaysia’s debt burden — which was significantly higher than the A-rated median — would remain a credit constraint.
“However, deep domestic capital markets and high savings provide a stable funding pool for the government’s debt and partly offset these fiscal weaknesses,” Moody’s added.