KUALA LUMPUR – The government has assured that the recent downgrade by Fitch Ratings will not hamper ongoing efforts towards economic recovery.
Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz said although the review by the agency on Malaysia’s credit rating did not go against current global trends, the government's official stance remains that the move failed to consider the country's success in implementing stimuli packages that are showing signs of aiding economic recovery.
Among the signs, he said, are:
- Slower gross domestic product (GDP) contraction at 2.7% during the third quarter of this year, among the best in Asean compared with 17.1% in the second quarter;
- Retention of more than 2.8 million jobs through programmes, such as wage subsidies, that have led to a decline in the unemployment rate from 5.3% in May to 4.7% in October;
- And, one of the lowest within the 10% range globally in terms of Covid-19 cases to death ratio, according to Johns Hopkins University.
“It should be emphasised that the change in ratings will not hamper Malaysia’s efforts towards economic recovery in 2021.
“The Budget 2021 initiative will continue the present momentum for recovery and is expected to contribute to the projected GDP growth target of 6.5% to 7.5% next year,” he told the Dewan Rakyat during the ministerial question session today.
Answering a question from Lim Guan Eng (PH-Bagan) on steps the government is taking to restore the country’s credit ratings, Tengku Zafrul said despite many saying the projection is too optimistic, Fitch's own projected a growth rate of 6.7% for the country is in line with Malaysia’s own projections.
“Other institutions, such as the International Monetary Fund (IMF), have projected growth of up to 7.8%, which is higher than the government's projection.
“This generally shows confidence for the Malaysian economy to soar again.”
He said since Fitch's announcement, there have been no knee-jerk reactions from the market.
“In this case, the FBM KLCI and the ringgit remain stable and we recorded a high demand (bid-to-cover ratio) which is 2.6 times more than the value offer for 10-year MGII (Malaysian Government Investment Issues) bonds issued last week.
“And yesterday, I also announced that eight venture capitalists from the US, South Korea, China, Indonesia and Singapore have agreed to invest in Malaysian start-up companies with investments valued up to RM1.57 billion.
“In simple words, investor in the country's long-term capital market remains strong.”
Last week, Fitch Ratings had downgraded Malaysia's long-term foreign-currency issuer default rating (IDR) to BBB+ from A-.
In its report, Fitch acknowledged that the authorities responded swiftly to the Covid-19 crisis, with material relief measures for affected individuals and businesses.
“The government has secured passage of core legislation to implement relief measures, including the 2021 Budget,” it said.
The ratings agency said 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.
Fitch had expected Malaysia's 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 ongoing recovery of exports of manufactured goods and commodities.
“These forecasts remain subject to uncertainty and depend on the near-term evolution of the pandemic, as illustrated by an increase in the number of daily cases since early-October,” it had said. – The Vibes, December 15, 2020
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