The World Bank projects the Malaysian economy to expand 4.6 per cent this year.Pixabay

KUALA LUMPUR: The Finance ministry has welcomed Fitch Ratings’ confirmation of Malaysia’s sovereign credit ratings at A- with a stable outlook.

The latest rating announced on July 18, follows similar confirmation by S&P Global Ratings on July 3.

“Malaysia has surprised many sceptics who expected a downgrade due to legacy issues from the previous government that loaded us with high debt and failed governance.

“Institutional reforms implemented by the current Government to enhance fiscal transparency and address high-profile corruption cases that will gradually improve Malaysia’s governance indicators, have convinced both Fitch Ratings and S&P Global Ratings that Malaysia’s sovereign credit rating deserves to be reaffirmed.

“Institutional reforms are a positive to credit ratings. Credit rating agencies assess a government based on multiple factors, including fiscal discipline, economic fundamentals, political stability and institutional quality,” said Finance Minister Lim Guan Eng.

He said Fitch expects Malaysia’s institutional quality to improve further over time due to the wider implementation of open tender, fiscal transparency, anti-corruption measures and institutional reform measures to promote accountability and fiscal responsibility.

In The Reporters Without Borders’ World Press Freedom Index, Malaysia improved its ranking by 22 places to 123rd out of 180 countries in 2019, from 145th in 2018, which indicates that Malaysia has the freest press in Southeast Asia.

Additionally, Malaysia advanced 9 spots to 15th from 24th out of 190 countries in the Ease of Doing Business ranking published by the World Bank this year.

Lim said Fitch’s affirmation proves again that the increase in direct debt had no adverse impact when the Government’s overall debt and liabilities had been reduced as a percentage of the GDP.

As reported previously, the Government’s total debt and liabilities as a ratio to GDP had been cut by 3.9 percentage points to 75.4 per cent as of end-2018, from 79.3 per cent at end 2017, he said.

“The Government is also confident of reducing its fiscal deficit from 3.7 per cent of GDP in 2018, to 3.4 per cent in 2019, and this will help address any concerns over the Government’s high level of indebtedness.

“It should be highlighted that Fitch believes the Government’s debt level relative to the GDP will gradually decrease over the next few years, due to a clear fiscal consolidation plan outlined by the Government,” Lim said in a statement today.

The World Bank projects the Malaysian economy to expand 4.6 per cent this year.

Sales data collected by the Department of Statistics Malaysia shows that wholesale and retail trade grew 5.6 per cent and 8.2 per cent year-on-year respectively in Jan-May 2019.

Low inflation enjoyed by Malaysian consumers is sustaining strong consumption growth.

In May 2019, the consumer price index increased only marginally by 0.2 per cent year-on-year, which is unchanged from the previous month.

Fitch in its global report, also cited the 13 per cent downturn in global semiconductor sales for the first half of 2019, compared to last year, as well as the cooling demand for both capital goods and car sales as factors that will slow down world trade growth.

“For Malaysia however, the numbers are still positive,” said Lim.

During Jan to May 2019 period, the quantity of vehicles sold rose by 13 per cent compared to the same period last year.

For the first half of 2019, Proton sales surged 60 per cent to 43,518 units whilst Perodua’s sales increased by 4 per cent to 121,782 units compared to last year.

Perodua has raised its 2019 sales projection, with its plants already operating at near full capacity, and will likely achieve the highest record annual sales this year.

Lim said Malaysia’s industrial output was also growing despite external challenges arising from the China-US trade war.

“Thanks to business relocation, trade and investment diversion, approved foreign direct investment (FDI) for all sectors

rose 73.4 per cent to RM29.3 billion in the first quarter of 2019, versus RM16.9 billion a year ago.

“The first quarter 2019 approved FDI growth was driven by a 127 per cent increase in approved manufacturing FDI to RM20.2 billion from RM8.9 billion in the same quarter last year.”

The May Industrial Production Index grew 4 per cent year-on-year beating market consensus of 3.5 per cent as compiled by Bloomberg.

May 2019 exports also rose 2.5 per cent year-on-year, also coming above market consensus.

Electrical and electronic products that formed 34.9 per cent of total May exports, expanded by 0.5 per cent year-on-year during the month.

“More importantly, Malaysia’s current account will remain in surplus to continue to protect the domestic economy against external challenges,” said Lim.

Meanwhile, he said unemployment rate has fallen to 3.3 per cent in the same month, versus 3.4 per cent in April 2019.

Lim said the banking sector remains well-capitalised with access to a liquid market, monitored by a competent and independent central bank.

“These positive developments point towards a sustainable GDP growth for the second quarter of 2019.”

He added that the application of new technology will raise Malaysian productivity and directly, Malaysian competitiveness.

Malaysia is already ranked as the 22nd most competitive economy in the world by IMD and the Government’s initiatives especially with respect to the Industry 4.0 will help keep Malaysia ahead, he said.

“The government will continue to pursue institutional reforms, maintain political stability, fiscal transparency and accountability, managing the reduction of debts and liabilities, good governance and sustainable economic growth that are strong credit positives towards affirmation of Malaysia’s sovereign credit ratings,” Lim said.