Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on January 23, 2020

KUALA LUMPUR: The Malaysian economy’s solid fundamentals and the government’s commitment to institutional reforms have convinced Moody’s that the country deserves its high sovereign credit rating of “A3” with a stable outlook, said Finance Minister Lim Guan Eng.

Guan Eng was referring to Moody’s annual credit analysis report last week that stated that Malaysia’s competitive economy, strong medium-term growth prospects and effective institutions are among the reasons behind the country’s ability to keep its sovereign credit rating high at “A3”.

“This compares favourably against some countries that have had their sovereign credit rating downgraded recently,” he said in a statement yesterday, noting that Malaysia’s economic strength scores well against the median of its A-rated peers, especially in terms of average gross domestic product growth.

“The country’s competitive, complex and diversified economy contributes to its resilience against global uncertainty caused by the China-US trade war.

“Coupled with solid institutions as measured by the World Bank through the Worldwide Governance Indicators, these factors provide a firm foundation for the country’s long-term economic prospects,” he added.

Guan Eng also noted that the latest set of economic data suggests the economy will be expanding faster in the coming months.

“As highlighted earlier, the December 2019 manufacturing Purchasing Managers’ Index is at its 15-month high, which points towards a healthy domestic manufacturing expansion in the near future.

“The RAM Business Confidence Index for the first half of 2020 is solid, with sentiment among small and medium enterprises is at its highest level of 54.2 points since the index first began in 2017.

“Additionally, the Leading Economic Indicator for October 2019 published by the Department of Statistics has increased by 1.4% to 120.3 points, which implies stronger economic growth in the coming quarters,” he said.

He said other statistics include more robust industrial production that rose 2% year-on-year in November 2019 versus 0.3% growth in October, expanding sales value for distributive trade that grew at 5.3% in November 2019 versus 5% in the previous month, and a low unemployment rate of 3.2% in November 2019.

The minister also highlighted the fact that inflation remained low and stable at 1% for December 2019.

Malaysia’s economic outlook would brighten further with the lessening of trade tensions between China and the US, he said, noting that the government has projected the economy to expand sustainably at 4.8% in 2020, faster than the expected growth rate of 4.7% in 2019.

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