KUALA LUMPUR (Feb 4): Malaysia's fiscal deficit could come in higher at 6% of gross domestic product (GDP) compared to the 5.4% deficit targeted by the government for 2021, opined Affin Hwang Capital chief economist Alan Tan.
"Looking at the current fiscal deficit position, there could be a possibility of it being 6% of GDP, which is similar to last year's 6% GDP as well," Tan said at Affin Hwang Capital's Malaysia Economic Outlook and Construction Sector Briefing today.
"I have already built in that the country's fiscal deficit position would deteriorate from the targeted 5.4% of GDP as mentioned in Budget 2021, to 6% this year," he added.
Asked whether the probability of the fiscal deficit coming in at 6% would have a detrimental impact on Malaysia's credit ratings with sovereign debt rating agencies, Tan said different agencies focus on different aspects. He pointed out that for example, Fitch places more emphasis on fiscal and debt levels, while Moody's tends to place more emphasis on the economic growth prospects.
"The rating agencies would also look at the government's current account surplus position, as well as the plans by the current government to correct its fiscal deficit position to nearly 4% by 2023," he said.
He is also expecting S&P to maintain its A- credit rating on Malaysian sovereign debt.
Just two months ago, Fitch Ratings downgraded Malaysia's sovereign rating from "A-" to "BBB+", with an improved outlook from negative to stable. The downgrade in December 2020 marked the rating agency's first for the country since the 1997/98 Asian Financial Crisis.
Meanwhile, Tan also noted there is the expectation there could be some form of further stimulus measures being introduced assuming if the current Movement Control Order (MCO 2.0) is extended beyond Feb 18.
On Jan 18, the government unveiled the RM15 billion PERMAI economic stimulus package. This package is its fifth economic stimulus package to date and is meant to support the nation's economy during MCO 2.0.
As it currently stands, MCO 2.0 is set to expire on Feb 18. It is applicable for all states in the country except for Sarawak.
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