Fitch downgrades Malaysia’s rating to ‘BBB+’ due to pandemic, political instability


FITCH Ratings has downgraded Malaysia’s sovereign rating to BBB+ from A- due to the Covid-19 impact and a prolonged period of uncertainty since March.

The ratings agency said in a statement today that the depth and duration of the pandemic have weakened several of Malaysia’s key credit metrics.

“Measures to contain the domestic spread of the coronavirus, combined with weak investment and low tourism receipts due to the pandemic, have reduced economic activity, as it has in many countries globally,” it said.

“The government has secured passage of core legislation to implement relief measures, including the 2021 budget, but, in Fitch’s view, lingering political uncertainty following the change in government last March weighs on the policy outlook as well as prospects for further improvement in governance standards,” it added.

After a significant improvement was made in 2019, the agency said prospect for a further improvement in Malaysia’s governance are uncertain.

“The new government continues to implement some transparency-enhancing measures launched under the previous coalition, and corruption trials of former officials have continued, but the government’s thin two-seat parliamentary majority implies persistent uncertainty about future policies, in Fitch’s view.”

The agency expects GDP to contract by 6.1% in 2020, before rebounding by 6.7% in 2021 due to base effects, a revival of infrastructure projects and an ongoing recovery of exports of manufactured goods and commodities.

Read our previous report here

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