Government’s direct debt does not affect Malaysia’s economic outlook

KUALA LUMPUR July 7: The Standard and Poor’s (S&P) Global Ratings’ has affirmed Malaysia’s issuer credit rating at A- with a stable outlook on July 3, 2019.

The Minister of Finance, Lim Guan Eng said this demonstrates its confidence in the country’s positive economic outlook, strong institutional profile, sound economic fundamentals and prudent debt management.

He said, the reaffirmation shows that the increase in government’s direct debt does not affect Malaysia’s sovereign credit ratings especially when the government’s overall debt and liabilities have been reduced.

“Among the key drivers of the rating is Malaysia’s healthy growth prospect. The World Bank projects Malaysia to grow by 4.6% this year. Low and stable inflation rate of 0.2% for March, April and May is encouraging consumption growth.

“Bank Negara Malaysia’s decision to cut its Overnight Policy Rate (OPR) by 25 basis points to 3.00% in May has eased lending cost for consumers. This can be seen among others from the 13% year-on year increase for total vehicle sales for January to May 2019 period,” Guan Eng said in a statement today.

The minister added, Malaysia’s export have been rising for the second straight month due to trade diversion. In May 2019, exports grew 2.5% to RM84.1 billion from RM82.1 billion a year ago. The 2.5% growth is above the 2.2% market consensus as compiled by Bloomberg.

“As a result of the export growth, trade surplus for the first five months of 2019 has risen by 4.3% to RM56.8 billion compared to RM54.5 billion in the same period last year.

“Although the government’s direct debt has risen to 51.2% of GDP in 2018 from 50.1% in 2017, it is only one component of the government’s overall debt and liabilities.

“The other components are committed government guarantees and finance leases as well as other liabilities including 1MDB debt which the government is compelled to service directly,” he reiterated.

The Minister also said, the government has successfully cut its overall debt and liabilities level as percentage of GDP by 3.9 percentage points from 79.3% in 2017 to 75.4% in 2018.

According to Guan Eng, the Ministry of Finance is confident of reducing the government’s fiscal deficit from 3.7% of GDP in 2018 to 3.4% this year. –Malaysia World News

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