KUALA LUMPUR – Malaysia’s debt levels are set to go up as the country embarks on measures to support businesses and households reeling from the Covid-19 pandemic, said Finance Minister Datuk Seri Tengku Zafrul Tengku Aziz.
“We’re anticipating and forecasting that deficit will go up this year for Malaysia,” Zafrul said yesterday during an interview on CNBC’s Asia Squawk Box.
He is expecting the fiscal deficit to come in at 5.8% to 6% while debt-to-gross domestic product (GDP) is set to balloon between 53% and 56%.
These figures come on the back of fiscal injections into the economy that currently stand at around 20% of GDP, Zafrul said.
“We are still focused on fiscal responsibility, of course. We have a debt-to-GDP at around 53%, it will end at around 56%. We have approval from Parliament to go up to 60%.”
In August, Dewan Rakyat voted to allow the government to borrow up to 60% of its GDP as part of temporary measures to ease the blow of the pandemic on businesses.
Malaysia has rolled out about RM305 billion in stimulus packages this year, to help inject cash into the economy.
Zafrul told CNBC the government is “optimistic” that the economy next year will expand between 5.5% and 8%, from negative growth this year.
For this, GDP is expected to be between -5.5% and -3.5%.
But some market participants had already raised concerns about Malaysia’s debt levels even before the pandemic took its toll.
In January, ratings agency Moody’s Investors Service said Malaysia’s debt burden was “significantly higher” than other countries with an “A” sovereign credit rating.
A sovereign credit rating is an assessment of a country’s creditworthiness, and an “A” rating means low credit risk.
“However, deep domestic capital markets and high savings provide a stable funding pool for the government’s debt, and partly offset these fiscal weaknesses,” Moody’s said at that time. – The Vibes, October 6, 2020
