Malaysia Progressing On Right Track Towards Restoring Fiscal Position

KUALA LUMPUR, Jan 23 (Bernama) – Malaysia is progressing on the right track towards restoring its fiscal position within three years and this is attested by three of the world’s largest international credit rating agencies, says the Minister of Finance Lim Guan Eng. In the positive January 2019 annual update, Moody’s stated that the country’s economic growth would stay stronger than its A-rated peers and that Malaysia’s strong diversified economy was partially offsetting the negative impact of the government’s high debt level. “This comes after Moody’s, on Dec 7, 2018, decided to maintain the government’s credit ratings at A3 on the back of Malaysia’s commendable growth, deep domestic capital market and solid institutional framework,” Lim said in a statement, adding that a change in credit rating was unlikely in the near term, and this would reassure investors and the business community. Another rating agency, Fitch Ratings, in a November 2018 report entitled, “Malaysia Budget Balances Wider Deficit with Transparency” said the 2019 Budget kept to a path of fiscal consolidation over the medium term. Fitch expected the debt ratios to fall in the next few years, provided the gross domestic product growth remained broadly in line with the authorities’ revised outlook for growth of 4.9 per cent for 2019 and 5.0 per cent in 2020. It also reaffirmed Malaysia’s sovereign ratings at ‘A-’ with stable outlook. S&P Global Ratings similarly commented that “the government’s commitment to gradual fiscal consolidation was credible and that one-off pressures such as funding of Goods and Services Tax (GST) rebates should abate after 2019. S&P also maintained Malaysia’s credit rating at A-. ”These rating agencies have admittedly expressed concerns about the government’s narrowing revenue base following the removal of the GST that was replaced with the Sales and Service Tax. “The concerns are being addressed, as can be seen by the encouraging increase in direct tax collection last year which rose by RM13.7 billion or 11.1 per cent, year-on-year, to a record high of RM137.0 billion. (US$1 = RM4.14) “This proves that, not only is the government on track with its consolidation exercise, the economy continued to grow last year, with corporate tax amounting to 51.1 per cent of direct taxes collected,” Lim added. -- BERNAMA