SO KUDOS to the Government for being able to convince S&P Global Rating to reaffirm Malaysia’s sovereign credit ratings at “A-“ and even to revise the country’s outlook to “Stable” from “Negative”.

In welcoming S&P’s latest rating review, Finance Minister Tengku Datuk Seri Zafrul Aziz said the revised outlook reflects Malaysia’s effective COVID-19 policy response which has enabled a strong economic recovery as well as the country’s resilience amid an uncertain and highly challenging global landscape.

Among others, S&P rationalised that its outlook revision to “stable” is in recognition of Malaysia’s consistently strong growth trend that is faster than sovereigns of similar income level.

“Though Malaysia’s budget deficits remain high, we expect its growth dynamics to offset vulnerabilities associated with its weak fiscal settings. In addition, political commitment to resume fiscal consolidation post-pandemic is strong, in our view,” explained the world’s top-three credit rating agency.

“Our affirmed ratings on Malaysia reflect the country’s strong external position, monetary policy flexibility, and record of supporting sustainable economic growth. The country’s elevated government debt stock and weak fiscal performance temper these strengths.

“Real GDP (gross domestic product) growth will accelerate to 6.1% in 2022 and 5% in 2023, sustained by strong exports, high commodity prices and domestic demand following reopening of the economy.”

Even as S&P has given Malaysia “a clean bill of health” so to speak in light of numerous vulnerabilities and headwinds ahead, the Government must not resort to resting on its laurels or assume that the Malaysian economy is already “well-oiled” to which the credit rating agency has issued a caveat:

“We may lower the ratings if economic growth suffers a prolonged downturn that lowers the trend growth 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 policymaking becomes materially less predictable.”

In reality, many slippery paths await, notably with the 15th General Election (GE15) looming not to mention political bickering which is getting heated up, or incessant doling out of subsidies or hand-outs as sweetener even as this may ‘ruin’ the Government’s fiscal position (which at RM77.3 bil for 2022 has been described by Tengku Zafrul as “the highest subsidy in history ever borne by any government”).

Above all else, this very much macro view of the Malaysian economy may not resonate with man-on-the-street who have to contend with spiralling cost of living stemming from a spike in inflation rate or who are staring at a bleak future in view of uncertainties in certain job markets.

In recent times, prices of fish, chicken and vegetables and many other typical staple food in the Malaysian household have reached a truly unaffordable level even for the M40 (Middle 40 or middle-income) group.

While it has to be acknowledged that Malaysia is not alone to face the wrath of global inflationary pressure which if not properly managed can lead to recession, the Government surely has a tall mountain to climb by first and foremost ensuring that its citizens are not left to be hungry.

And thus far, the Government has to admit that it is under-performing in this department as evident from the unsettled chicken/egg price uncertainties. – June 28, 2022

https://focusmalaysia.my/many-holes-still-to-patch-even-with-positivity-of-sps-latest-credit-review/