In a recent statement, Fitch Ratings affirmed Malaysia’s long-term foreign-currency issuer default rating (IDR) at “BBB+” with a stable outlook. The rating agency highlighted the nation’s balanced economic landscape, incorporating a diversified economy with robust medium-term growth prospects. However, it also underscored certain challenges, such as high public debt, a relatively low revenue base compared to operating expenditure, and potential political considerations that could impact long-term policymaking and reform implementation.
Fitch anticipates Malaysia’s real gross domestic product (GDP) growth to moderate to 4 percent in 2023 and 4.2 percent in 2024, following the significant post-pandemic rebound of 8.7 percent in 2022. The agency cited potential headwinds for Malaysia’s exports due to weak global demand and trade restrictions. Nevertheless, it expressed optimism that resilient domestic demand would be supported by rising wages and increased investment activity.
The rating agency projected a further decline in Malaysia’s general government deficit to 3.5 percent in 2025. This is expected to result from ongoing subsidy rationalization efforts and the implementation of the global minimum tax. Fitch also forecasted a narrowing of the general government deficit to 2.8 percent of GDP in 2025, down from an average of 5.2 percent of GDP observed in the years 2020-2022.
Moreover, Fitch estimated a decrease in general government debt to 72.3 percent of GDP in 2023, compared to 72.8 percent in 2022. This positive trend aligns with efforts to manage and reduce overall debt levels. The rating agency’s optimistic outlook is further reflected in its forecast of Malaysia’s current account surplus, expecting it to narrow slightly to 2.6 percent of GDP in 2023, down from 3 percent in 2022.
Fitch’s statement emphasized Malaysia’s advantageous position in benefiting from global supply-chain diversification, attributing this to its competitive manufacturing sector. Notably, the country has experienced a noticeable uptick in foreign direct investment (FDI) since the reopening of the economy in 2022.
While Fitch Ratings acknowledges Malaysia’s economic strengths and positive trajectory, the agency remains vigilant about potential challenges. The intricate balance between economic growth, fiscal policies, and external factors will continue to shape Malaysia’s financial landscape in the coming years. Investors and policymakers alike will closely monitor the nation’s ability to navigate these dynamics and sustain its economic resilience.
(Source: Fitch Ratings)
