KUALA LUMPUR: The Malaysian economy (‘A3’ positive outlook) posted strong growth in the first half of 2014, buoyed by private sector consumption and investment, said Moody’s Investors Service.
The higher prices for petroleum and other hydrocarbons aided exports and government revenue, but this trend also underscored the susceptibility of external and fiscal balances to commodity prices.
In a statement yesterday, Moody’s said the higher prices for petroleum and other hydrocarbons aided exports and government revenue, but this trend also underscored the susceptibility of external and fiscal balances to commodity prices.
At the same time, contingent risks to the government had continued to build, in part represented by the persistent rise in government-guaranteed debt, it said.
Moody’s said this in its just-released credit analysis, “Malaysia”, which looked at the country’s credit profile in terms of: Economic strength (assessed as ‘high (+)’);Institutional strength (‘high’); Fiscal strength (‘high (-)’); and, Susceptibility to event risk (‘low’).
The report said the Malaysian government kicked off its fiscal reform programme in 2013, prompting a revision of the outlook on the ‘A3’ sovereign rating to positive from stable last November.
The Malaysian economy performed strongly in the first half of 2014 despite the drag on growth from fiscal consolidation, it said.
It said the real gross domestic product (GDP) growth averaged 6.3 per cent year-on-year over this period, higher than all other major countries in the Asia-Pacific other than China.
The report further noted that the current account surplus and ample onshore liquidity remained intact and served as buffers to potential external financial shocks.
While the share of non-resident participation in domestic government bond markets continued to rise, the potential for interest rate volatility in the event of an outflow is mitigated by the presence of large domestic institutional investors as reliable sources of funding for the government, it said.
The report said Malaysia’s financial system continued to provide sound institutional and liquidity support, while its capital structure and funding base pose very low contingent risk to the sovereign.
It said the most prominent risk to financial stability was the rise in household indebtedness, which stood at 86.8 per cent of GDP at end-2013, higher than other developing countries in the region, such as India, Indonesia and Thailand. — Bernama