Image credit: Deutsche Welle
KUALA LUMPUR: Malaysia's 2021 Budget will continue to help its economic recovery from the large coronavirus-induced shock, said Moody's Investors Service.
Its analyst of sovereign risk group Christian Fang said in particular, the ongoing focus on wage subsidies and financial assistance to households and small and medium enterprises would support domestic demand by averting large-scale layoffs and business closures.
Moody's expects Malaysia's real gross domestic product (GDP) growth to rebound to more than seven per cent next year, from a contraction of around 5.0-5.5.5 per cent this year.
However, Fang said the still-wide deficit for 2021 would increase the government's fiscal consolidation challenge over the next few years and imply a backloading of efforts to reduce its debt burden over 2022-2023.
Moody's forecasts Malaysia's direct debt burden to remain above 62 per cent of GDP by the end of 2021, compared to below 53 per cent at the end of 2019.
Fang said Malaysia's debt burden was likely to remain high over the medium term, without sharper narrowing of budget deficits beyond 2021.
This would be a credit weakness for the sovereign relative to its peers, Fang added.
Source: https://www.nst.com.my/business/2020/11/639020/malaysias-budget-aid-recovery-push-gdp-over-70pct-2021-moodys