KUALA LUMPUR – Malaysia’s institutions and policies remain relatively credible and effective despite the volatile state of domestic politics in recent years.
Moody’s sovereign risk group assistant vice-president and analyst Christian Fang said generally, macroeconomic institutions have not been made targets, and policies have remained sound despite a series of political upheavals from 2018 to 2020.
“Even with the abolition of the goods and services tax in 2018, there was still an appetite for fiscal consolidation by the fiscal authority,” he said at the Moody’s Inside Asean Malaysia media round table held virtually today.
He was replying to questions on how Malaysia’s current political scenario will affect the country’s credit profile.
Foreign investors have also not been deterred in a big way by the political changes, he said.
“One could even argue that maybe, some foreign investors are getting used to the political noise. This is something that you see in some developed markets, where sometimes, a hung Parliament occurs.
“Investors are aware of some of these structural issues.”
Fang added that the “noise” is expected to stay, and a stable, long-term coalition might not be a reality anytime soon.
“At the end of the day, the way we assess political risk is really towards the impact of politics on institutional effectiveness, macroeconomic policy-making and the investment climate.”
He said Moody’s will continue monitoring how politics influences policies and institutions.
On the Covid-19 vaccination programme’s impact on Malaysia’s economic growth, he said gross domestic product will likely accelerate faster than the 6% growth projected by the ratings agency earlier.
“The sooner Malaysia achieves the target of 70% to 80% of its population vaccinated – in a more optimistic scenario, that is potentially achieved by the end of the year – it will allow the economy to open quicker, and provide some upside to our GDP forecast.
“We think that once the economy reopens, Malaysia can get back to a high growth rate, and that will sustain its economic strength.”
On the pandemic’s impact on Malaysia’s credit profile, he said Moody’s usually looks at a country’s medium-term growth prospects.
“One year’s recession does not really affect our view of a country’s economic strength. We are looking at a 10-year average for GDP growth.” – Bernama, April 7, 2021
