PETALING JAYA: Economists have offered solutions to reverse the downgrade made by a US-based ratings agency on Malaysia’s sovereign rating, saying there is no cause for undue alarm.
Fitch Ratings downgraded the country’s rating from “A-” to “BBB+”on Dec 4 and followed this two days ago with downgrades of Petronas and Telekom Malaysia, also from “A-” to “BBB+”.
Hoo Ke Ping, an economic adviser at Kingsley Strategic Institute, described the change as attention grabbing, but said the fix could be simple.
He suggested that the finance ministry engage with Fitch to state Malaysia’s case, saying he believed the company’s assessment of political instability and increased fiscal burden might have been overstated.
“Fitch has failed to recognise that this government had only just come in when Covid-19 arrived and, with that considered, it has done quite well,” he said.
“In addition, our recovery is looking V-shaped and the national debt level has been kept below 60%, both of which are good metrics compared with a lot of other countries.
“They might see an unstable political situation, but while the government might be weak, it is not as if the opposition is any stronger. So it may be more stable than they realise.”
He called for efforts to improve communications with ratings agencies, saying good relations could go a long way.
But another economist, Centre for Market Education CEO Carmelo Ferlito, said Putrajaya’s effort to reverse the downgrade could require more significant moves.
He sees a need for the government to first dispel concerns over what he views as the budget’s “lack of general recovery strategy” to deal with Covid-19’s effect on the economy.
He said this called into question the long-term effectiveness of the government’s overall spending measures.
“Secondly, as political tensions are a source of concern, I believe that at this point elections are a better solution,” he said, adding that a general election might give Malaysia “clear guidance” that could lead to improved economic growth.
Ferlito also said there was no need for the government to “fall into a desperate state” following the drop in rating although it should not rest on its laurels.
“Let’s not disregard this warning with a ‘tidak apa lah, it was a difficult year’ response.”
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