Image credit: Malay Mail

KUALA LUMPUR (Jan 22): 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.

Lim 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," Lim said in a statement today, noting that Malaysia’s economic strength scores well against the median of its A-rated peers, especially in terms of average gross domestic product (GDP) 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 (WGI), these factors provide a firm foundation for the country’s long-term economic prospects," he added.

Lim also noted in his statement 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 toward a healthy domestic manufacturing expansion in the near future.

“RAM Business Confidence Index for the first half of 2020 is solid, with sentiment among small and medium enterprises (SMEs) 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 Malaysia has increased by 1.4% to 120.3 points, which implies stronger economic growth in the coming quarters,” he said.

Lim 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.

"The inflation rate for 2019 stood at only 0.7%, one of the lowest in the region,” he said. “Clearly the removal of the Goods and Services Tax (GST) and the fixing of RON95 petrol price cap at RM2.08 per litre have checked price rises compared to the previous government’s imposition of the GST which had pushed inflation to as high as nearly 5%.”

Lim said Malaysia’s economic outlook would brighten further with the lessening of trade tensions between China and the United States.

"Malaysia is an open economy that is highly integrated with the global supply chain. Any improvement in global trade volume would increase demand for Malaysian exports, and directly boost Malaysian GDP growth," he said.

The Minister also noted that the Government has projected the Malaysian economy to expand sustainably at 4.8% in 2020, faster than the expected growth rate of 4.7% in 2019.