KUALA LUMPUR: S&P Global Ratings has revised Malaysia’s long-term sovereign credit ratings outlook to ‘stable’ from ‘negative’ as it believes the country is on a strong economic recovery path compared to others at similar income levels, said Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz, in reference to the global ratings agency’s latest report on Malaysia.

S&P also projected that Malaysia’s gross domestic product (GDP) will grow 6.1 per cent this year and 5.0 per cent in 2023 supported by strong exports, high commodity prices and domestic demand following the reopening of the economy.

In response to S&P’s GDP forecast of 6.1 per cent, Tengku Zafrul said it is in line with the government’s expectation of higher growth in subsequent quarters, and in alignment with the higher end of Bank Negara Malaysia’s official estimate of 5.3-6.3 per cent.

Concurrently, S&P has also affirmed the ‘A- long-term and ‘A -2’ short-term foreign currency sovereign credit ratings as well as Malaysia’s ‘A’ long-term and ‘A-1’ short-term local currency ratings.

“The stable outlook reflects our expectations that Malaysia’s steady growth momentum and strong external position will remain in place over the next two years.

“At the same time, we anticipate the policymaking environment will be supportive of restoring fiscal settings to a firmer footing,’’ the rating agency said in a statement.

S&P states that it may raise the ratings on Malaysia if fiscal outcomes outperform its forecasts.

“This would be shown from net debt stock falling below 60 per cent of GDP or interest payments less than 10 per cent of general government revenues,” it said.

On this, Tengku Zafrul said the government remains fully committed to fiscal consolidation and ensuring fiscal sustainability.

Supported by the gradual implementation of the Medium-Term Revenue Strategy, which aims to improve the country’s revenue base, the government will resume its consolidation path gradually and strategically as the recovery becomes more firmly entrenched.

This will balance short-term fiscal requirements with long-term fiscal and economic sustainability.

One key effort towards this is the proposed enactment of the Fiscal Responsibility Act by end-2022.

However, S&P also said Malaysia may see its ratings lowered if economic growth suffers a prolonged downturn that reduces growth trend in real GDP per capita to levels in line with that of peers.

‘’Downward rating pressure could also build if political stability in Malaysia deteriorates such that policy-making becomes materially less predictable,’’ S&P noted. – Bernama