Fitch affirms Malaysia at "BBB+" with stable outlook

KUALA LUMPUR, Dec. 17 (Xinhua) -- Fitch Ratings has affirmed Malaysia's long-term foreign-currency issuer default rating (IDR) at "BBB+" with a stable outlook.

The rating agency said in a statement on Monday that Malaysia's ratings are supported by strong and broad-based medium-term growth, driven by robust domestic and foreign investments, and persistent current account surpluses with a diversified export base.

It noted these strengths are balanced against high public debt, a low revenue base relative to current expenditure, and weaker external liquidity relative to peers.

Fitch also expected Malaysia's economy to expand by 5.2 percent in 2024, then slow to 4.5 percent in 2025 and 4.3 percent in 2026.

Steady labor market conditions and an income boost from pay hikes for civil servants in December 2024 and January 2026 should support household spending, with growth further underpinned by investments from government-linked companies and foreign investment related to supply-chain diversification, it said.

"However, while Malaysia's export performance has benefited from the global tech upcycle in 2024, we expect momentum to slow in 2025 due to weaker external demand. Growth prospects also face downside risks from an escalation in geopolitical tensions," it added.

Fitch expected 2025 Malaysian federal government revenue/gross domestic product (GDP) to remain steady from its 2024 estimate of 16.5 percent.

Fitch also forecasted the federal government deficit to decline to 3.5 percent of GDP in 2026, driven by continued subsidy rationalization and modest tax increases.

"The government aims to reduce the deficit to below 3 percent in the medium term. We view this as a credible, gradual fiscal consolidation path," it noted.

It also projected general government debt/GDP will decrease to 75 percent by 2026, from 77 percent in 2023, but this will still be above its median "BBB" category sovereign forecast of 59 percent. ■