Malaysia’s sovereign credit ratings by S&P Global Ratings and Fitch Ratings. Good or Bad?

Malaysia’s sovereign credit ratings by S&P Global Ratings and Fitch Ratings. Good or Bad?

According to investopedia.com “Sovereign credit ratings measure the overall economic conditions of a country, including the volume of foreign, public, and private investment, capital market transparency, and foreign currency reserves.”

Briefly, if the country’s economic conditions are positive, they receive better rating and if they are negative, they receive lower ratings. If they have LOTS of debts which are moving towards unmanageable, they would be rated lower and if they have budget surplus year after year, this country would be seen positively. If the country has low foreign reserves, they are also rated lower because the country may default on debt payments. Countries with huge foreign reserves should therefore be rated higher if compared to the ones with low foreign reserves.

Okay, there’s an exception. America does NOT need huge foreign reserves because the US$ is used as a foreign reserve currency by most countries in the world. They only have US$35 billion in reserves. (Source: CEIC data) In other words, even if their reserves are low, their ratings can continue to be very high.

Article in freemalaysiatoday.com Prime Minister Anwar Ibrahim said that the recent ratings by S&P Global Ratings and Fitch Ratings showed that the government has responsible economic management.

S&P Global and Fitch Ratings maintained Malaysia’s country’s sovereign credit ratings at A- and BBB+, respectively.

S&P also projected that Malaysia’s economic growth will recover to 4.3% this year through higher exports and robust private sector investments.

Fitch Ratings today affirmed Malaysia’s sovereign rating at BBB+ with a ‘stable’ outlook, citing strong medium-term growth prospects, but flagged high public debt, low government revenue, and near-term political challenges. Do read here for the full article: Article in freemalaysiatoday.com

Rating is based on human… and thus, it’s based on their analysis yeah

I have not found a list where the rating agency just tick, tick and tick and whoever gets a certain number of ticks will be rated higher while the countries which prints money endlessly, well, they should be downgraded lah. Countries who kept borrowing more money, how can these countries be considered having good set of policies or even fundamentals right? Well, everyone is entitled to their own assessments.

I personally assess any country having deficits for never ending period of years as not worth of an investment grade rating. It’s like if the country does not have enough food and kept importing food which made the country poor and this happens year after year, what do you think the rating should be then? Happy deciding, as a reader.

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