Malaysia’s improved ranking will keep sovereign credit ratings high

Nation’s scores in the 2020 Ease of Doing Business Index rose by 0.2 point, allowing it to climb 3 places to 12th in 2020 from 15th in 2019


MALAYSIA’S positive performance in both the World Bank’s Ease of Doing Business and the Worldwide Governance Indicators (WGI) indices will play a critical role in keeping the country’s sovereign credit ratings high, said Finance Minister Lim Guan Eng (picture).

Lim attributed successful institutional reforms as Malaysia’s improved ranking in the World Bank’s Ease of Doing Business to 12th place in 2020 from 15th in 2019.

“Malaysia is also among the best improved economies in the World Bank’s 2018 WGI published earlier this month, which is a strong credit positive in the evaluation of sovereign credit ratings,” Lim added.

Malaysia’s scores in the 2020 Ease of Doing Business Index rose by 0.2 point, allowing the country to climb three places to 12th in 2020 from 15th in 2019.

This in turn made the country as the fourth easiest place to do business in Asia after Singapore, Hong Kong and South Korea, an improvement from the previous year when Malaysia was ranked fifth.

Lim said this is Malaysia’s best ranking since 2015.

“The rise was contributed by regulatory reforms that made starting a business and dealing with construction permits easier,” he said.

The minister also said Malaysia’s reaffirmation of its sovereign credit ratings will silent critics on how the government manages the economy.

“The government remains committed to implementing its institutional reforms, while supporting economic growth in line with the overall Shared Prosperity Vision 2030.

“Successes on these fronts will assist Malaysia in reaffirming its sovereign credit ratings at A3 or A-, which is the best rebuttal to critics who claim that the present government does not know how to manage the economy or has increased government’s debts excessively,” he said.

Malaysia is also among the most improved countries in the World Bank’s 2018 WGI, which measures institutional quality across 214 countries by accounting for six dimensions: accountability, political stability, government effectiveness, regulatory quality, rule of law and corruption.

Malaysia, according to Lim, has improved in five dimensions. He said this will have a positive impact on the government’s credit ratings.

“In determining sovereign credit ratings, international credit rating agencies take into account various factors including fiscal conditions, economic conditions and institutional quality of a country.

“Indeed, credit rating agencies use both the Ease of Doing Business and the WGI in ascertaining a country’s institutional quality, and therefore credit ratings,” he said.

Meanwhile, the domestic economy continues to exhibit resilience with the Industrial Production Index growth accelerated to 1.9% year-on-year (YoY) in August 2019, from 1.2% in July 2019.

“This was due to sustained manufacturing growth and recovery in the mining output. September inflation rate was at 1.1% and the low and stable inflation is conducive for private consumption expansion,” he explained.

Lim said sales of wholesale and retail trade grew 5.8% YoY in August 2019, faster than the 5.7% growth recorded in July.

Unemployment rate in August 2019 also remained low and stable at 3.3%.