Malaysia Economic Outlook Revised To Stable

International credit rating agency Fitch has affirmed Malaysia's long-term foreign currency Issuer Default Rating (IDR) at 'A-' and local currency IDR at 'A', while revising the country's economic outlook to stable from negative.



The announcement by Fitch in a statement Wednesday is seen as a major boost to the declining popularity of premier Najib Razak's fiscal reforms.



Fitch also maintained an 'A' on Malaysia's senior unsecured local currency bonds.



The ratings firm said Malaysia's fiscal finances have improved since last year with the general government deficit falling from 4.6 percent of gross domestic product (GDP) in 2013 to 3.8 percent of GDP in 2014 and that general government debt/GDP declined from 54.7 percent at the end of 2013 to 53.9 percent at the end of 2014.



Besides that, Fitch also viewed the progress on the Goods and Services Tax (GST) and fuel subsidy reform as supportive of fiscal finances, while efforts are seen to narrow deficits this year despite lower oil prices.



Nevertheless, according to Fitch, as against the 'A' median, Malaysia's fiscal position continues to remain weak. 



However, it said that general government debt as a share of GDP at the end of 2014 was 53.9 percent, which is still above the 'A' median of 47.2 percent.



The rating agency also noted Malaysia's declining current account surplus from an average of 15.6 percent of GDP from 2005 to 2009, had fallen to 7.2 percent between 2010-2014.



"Fitch believes this fall is being driven by a decline in the savings rate and a pick up in investments that is partly driven by the economic transformation program," the firm said. - Kuala Lumpur