by SHAHEERA AZNAM SHAH
S&P Global Ratings’s (S&P) affirmation of Malaysia’s sovereign credit ratings is a testament to the country’s strong external position, monetary policy flexibility and recognised track record in supporting sustainable economic growth during challenging times. Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said.
He said the affirmation also demonstrates S&P’s confidence in Malaysia amid the unprecedented credit rating pressures globally, which saw about 20% of all sovereigns with negative outlooks at the end of 2020 were downgraded by the main rating agencies.
S&P Global Ratings has affirmed its “A-” long-term and “A-2” short-term sovereign credit ratings on Malaysia, besides also affirming its ‘A’ long-term and ‘A-1’ short-term local currency ratings on the country.
The ratings agency however said the outlook on long-term ratings remain negative.
Due to the unprecedented challenges, Tengku Zafrul said growth recovery is expected to diverge across countries and sectors, reflecting variations in pandemic-related challenges as well as the extent of fiscal support.
“In addressing such challenges, Malaysia has announced the National Recovery Plan (NRP), comprising four phases that will enable the country to exit the Covid-19 pandemic.
“This provides certainty and clarity especially in terms of reopening economic and social sectors once the thresholds are met,” he said.
Despite the higher downside risk to growth due to recent containment measures, Tengku Zafrul said the marginal impact on the economy is expected to decrease as Malaysia’s action through each phase of the NRP.
“As more economic and social sectors reopen, various sectors have been adapting to operating remotely by embracing digital technology.
“The overall impact to the economy is expected to be less severe compared to the MCO 1.0 implemented in March 2020,” he said.
Moving forward, Tengku Zafrul said Malaysia’s economy is expected to gradually recover as the National Covid-19 Immunisation Programme is gaining its pace and lowering the daily positive cases to meet the NRP thresholds for a broader reopening of economic and social activities.
“Notably, S&P has acknowledged that Malaysia’s mature electrical and electronics (E&E) manufacturing sector is well-positioned to benefit from a global surge in demand and the global tech upcycle, supporting exports for the next one to two years.
“The government’s policy in encouraging digitalisation and technology adoption is also set to boost Malaysia’s longer-term economic prospects and resilience.
“Additionally, the 12th Malaysian Plan (2021 – 2025) will provide a blueprint for sustainable growth, aimed at strengthening socio-economic inclusivity and environmental sustainability,” he said.
He believes that solidifying Malaysia’s rating strength is its strong credit standing, supported by a resilient external position and well-developed domestic bond market.
Overall, he said the government’s current priority is to protect lives from the Covid-19 and ensure the country’s economic growth prospects remain strong in the medium to long term, guided by the NRP and the principles of prudent financial management.