KUALA LUMPUR (May 14): Malaysian Rating Corporation Bhd (MARC) remains positive about the long term perspective for Malaysia’s development under the new government, following the 14th General Election (GE14) last Wednesday (May 9).

MARC said in a press statement today that the government transition post GE14 has no impact on Malaysia’s sovereign credit rating. MARC said it does not expect any significant shift in the long term macro policy direction at this junction. 

Economic growth will remain resilient on the back of economic policies that are generally proactive and practical, supported by strong macroeconomic and prudential policy frameworks.” MARC said. 

Bank Negara Malaysia’s effective monetary policy, for example, is one of the key factors contributing towards Malaysia’s economic success, the corporation added.

Meanwhile, MARC is worried over rising government debt, as the debt in absolute term has risen over the years, despite the federal government's debt-to-gross domestic product ratio having moderated recently. 

“By end-2017, government debt had risen by 50.6% from its end-2011 level, while debt guaranteed by it had risen by more than 90% over the same period,” MARC said. 

Speaking about risk perceptions under political development, MARC said the fiscal sustainability has been raised, due to abolishment of the Goods and Services Tax (GST) brought up by the new government, as it is quite a sizeable exposure for the government income, “which accounted for roughly 20% of total federal government revenue in 2017,” MARC said.

It is reasonable to see kneejerk reactions in the market, pertaining to fiscal sustainability issues. Together, the GST is only one of many variables in the budget balance equation, MARC added. 

MARC believes it is still very early days of the new government and further policy clarity with regard to fiscal policy measures will be necessary, in order to give a fair assessment of the budgetary landscape. 

MARC rates the government of Malaysia at AAA with a stable outlook, as it has the lowest relative credit risk in the country.