MARC affirms Malaysia’s AAA/Stable rating

PETALING JAYA: Malaysia Rating Corp Bhd (MARC) has affirmed its public information foreign currency sovereign rating of AAA/stable on Malaysia under its national rating scale.

It cited that the rating reflects credit strengths, including a competitive and well diversified economy.

In the World Economic Forum’s Global Competitiveness Index 4.0 ranking, the ratings agency noted that Malaysia secured a relatively high position at 27th place.

“It is important to point out that Malaysia’s competitiveness has been evident in among other things, a persistent current account surplus, and consequently, a healthy external position,” it said in a statement.

Coupled with its proactive and practical economic and monetary management, MARC observed that spillovers from episodic financial market volatility into the real economy have been minimal.

It has identified the Covid-19 pandemic and the recent crude oil price collapse as key credit challenges.

Between the two, the pandemic is the most worrisome factor as there is still no vaccine against the virus.

“Against this backdrop, economic and financial risks have risen. In the private sector, for example, the pandemic and the measures to contain its spread have severely impacted the balance sheets of corporates and households,” said the ratings agency.

To mitigate such impact, the government, setting back fiscal consolidation, has announced a string of stimulus packages.

Moving forward, it believes more measures to be necessary as the full impact of the pandemic has yet to be fully realised, along with the measures to curb it.

MARC noted that the fiscal implication will be significant over the short to medium term, the unorthodox policies rolled out to support the pandemic-hit economy are positive for Malaysia’s overall credit profile over the long term.

“The stable outlook reflects our expectation that broad economic policy continuity – despite the change in government – will be maintained and economic and monetary management will remain proactive and practical in the face of the Covid-19 pandemic,” it said.

It also reflects the ratings agency’s expectation that Malaysia’s external position will remain healthy as headwinds rise.

Nevertheless, it expressed caution over the outlook citing that the pandemic is still developing, with its attendant impact on oil prices.

MARC also acknowledged that cannot discount the country’s uncertain political landscape.

Going forward, positive evidence of the effectiveness of the government’s fiscal and monetary policy mix to mitigate the impact of the Covid-19 will improve Malaysia’s credit profile.

On the other hand, the rating agency said that it will deteriorate should the easing policy mix prove ineffective, the viral outbreak resurges and partial lockdowns are reintroduced; or oil prices stay at depressed levels for long.

source https://www.thesundaily.my/business/marc-affirms-malaysia-s-aaa-stable-rating-XA2651437