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GDP growth, deficits and A- ratings as per Fitch Ratings

Posted in Malaysian economy

Ringgit is weak. Singaporeans are enjoying themselves in Johor while Malaysians are feeling the pinch whenever we travel, well except if we travel to the UK for which Brexit has wrecked havoc. So, what’s really happening to the economic fundamentals? This is Fitch Ratings’s statement as reported in many major medias. “Malaysia is better placed than many net commodity exporters to cope with the lingering effects of the negative shift in its terms of trade.” Yes, this is also one of the international rating agency which is still rating Malaysia at A-(lowest investment grade). Malaysia has kept its ‘A-‘ rating, which has been on Stable Outlook since mid-2015. The following were also shared. In 2014, the revenue from oil (Petronas) was 30% of Malaysia’s total revenue. Any fall in oil price is thus a very big thing. By the end of 2016, oil revenue would only account for around 14.6% of total revenue.

With continuous economy diversification, expect this to fall further and yes, Malaysia is not going bankrupt anytime soon based on all the analyst reports whether internal or external. A fact which has already happened was that dividends from Petronas has fallen from RM29 billion in 2014 to just RM16 billion in 2016 and should only be RM13 billion in 2017. Since GDP growth is expected to be positive, the contribution from oil in percentage will likely be even lower in 2017. Who wants to bet one cup of kopi-O against me that it may even be possibly near 10 percent of GDP by end of 2017? Haha. I have confidence with our BNM governor too.

Fitch Ratings also sees the Malaysian Federal Government debt under 54% of gross domestic product (GDP) by year end as achievable. Bloomberg also reported recently that the recent weakness in Ringgit is not supported by fundamentals. On the fiscal deficit, Fitch said reasonably strong GDP growth has helped to stabilise Malaysia’s federal government deficit and debt levels. Good Services Tax (GST) introduced in April 2015 has also lent support to non-oil revenue. “Fitch expects the 2016 deficit to come in at 3.2% of GDP, but views the 2017 target as achievable.” The targeted deficit for 2017 is 3 percent while the government expects 2016 to end at 3.1 percent deficit. Happy following.

written on 25 Oct 2016

Next suggested article:   Moody’s: Malaysia is fundamentally fine, still


One Comment

  1. Fred

    Despair not.

    Rating A- is still higher than Indonesia, Philippines, Vietnam, Cambodia and even Thailand. Laos and Myanmar are not even rated by Fitch.

    Naturally, oil export by Malaysia is not insignificant and when oil prices drop so much, inevitably it has some effect onto the economy.

    Still A- is still credible. Still investable.

    October 26, 2016

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