Sovereign ratings likely to stay status quo for the next few months – Maybank IB

KUALA LUMPUR: Malaysia’s sovereign rating is likely to be status quo for at least the next three to six months, said Maybank Investment Bank (Maybank IB).

The investment analysts said currently both S&P and Moody’s rate Malaysia at A-/A3, while Fitch Ratings assigns one notch lower at BBB+.

It said all three agencies have a stable outlook on Malaysia during the last rating updates in February-June 2023 and both the positive and negative rating triggers were little changed.

“We think Budget 2024 reaffirms the government’s commitment to fiscal consolidation at a gradual pace targeting additional reduction in the deficit-to-GDP (gross domestic product) ratio,” it said in a research note.

However, the research house said it still seems insufficient to build a strong case for rating upgrade yet from the debt metrics angle.

“Unless one or more of the rating agencies decide to upgrade the institutional strength of Malaysia which can be very subjective, or tangible progresses are made toward achieving some of the targets set under the Madani Economy framework on, for instance, competitiveness, growth and governance.

Maybank IB also stated that Malaysia’s public indebtedness has been higher than single-A median that is closer to 40 per cent of GDP.

“Debt affordability measured by the interest expense/revenue ratio is projected to drop to 16.2 per cent in 2024 (2023E: 15.2 per cent, 2022: 14 percent) as borrowing costs continue to rise while revenue growth plateaus,” it added.

On Friday, Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2024, themed ‘Economic Reform: Empowering the People’.

Anwar, who is also the Finance Minister announced an allocation amounting to RM393.8 billion, the highest budget ever presented, outlining three main focuses, namely, Best Governance for Service Agility, Restructuring the Economy to Accelerate Growth and Improve People’s Living Standards. – BK