Malaysia Can Get Positive Ratings If Fiscal Outperformance Sustains Into 2025 - Maybank Research

KUALA LUMPUR, March 10 (Bernama) -- Maybank Research Pte Ltd has reiterated its views that Malaysia could get one positive rating action from S&P, Moody’s or Fitch by mid-2026 if the momentum of fiscal outperformance sustains into 2025. 

In a note today, it said that currently, Moody’s and S&P rate Malaysia at “A3/A-”, while Fitch is one notch lower at “BBB+”, and all three agencies have a stable outlook on the rating.

“We continue to expect one positive rating action from either S&P, Moody’s or Fitch by around mid-2026, although this will likely require Malaysia to deliver additional fiscal outperformance in 2025 to improve its score in the fiscal pillar, as this has been the main constraint on Malaysia’s credit profile,” it said.

Maybank Research said that institutional profiles have remained stable and the economic pillar is underpinned by resilient growth.

“Public indebtedness will likely remain at or above 60 per cent of gross domestic product (GDP) over the next two-three years unless GDP growth surprises strongly to the upside.

“Improving tax collection and raising government revenue are also key to lifting Malaysia’s rating upside,” it said.

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According to the bank, the government has shown fiscal discipline, reducing the budget deficit to 4.1 per cent of GDP in 2024 from 6.4 per cent in 2021.

While it remains higher than the 3.4 per cent pre-Covid in 2019, it said additional deficit reduction is expected in 2025, and the medium-term fiscal framework targets a gradual decline in the budget gap to around 3.0 per cent of GDP in 2027. 

Meanwhile, Maybank Research forecasted the Malaysian Government Securities (MGS) and Government Investment Issue (GII) issuances at RM164 billion gross and about RM80 billion net to fund the RM80 billion budget deficit and RM83.5 billion refinancing for maturities, assuming the government will meet its deficit target of 3.8 per cent of GDP in 2025.

“We don’t expect additional supply to fund the run-down in Treasury Bills, as the total outstanding has already been reduced to RM15 billion in December 2024 from RM31.5 billion in December 2022, accounting for only a small 1.2 per cent share of total public debts.

“We assume the US$1 billion foreign currency bond maturity in April will be refinanced in US dollar; otherwise, we would revise our gross supply forecast upward by RM4 billion,” it said.

-- BERNAMA