Fitch Ratings unexpectedly raised its outlook on Malaysia to “stable”, saying it expects the country’s fiscal deficit to narrow further this year despite lower oil prices, sending the ringgit and local stocks higher.
On Wednesday, the agency maintained Malaysia’s long-term foreign currency issuer default rating (IDR) at A- and local currency at A, with the outlook revised up from negative.
In response, Malaysia’s finance ministry said it “remains resolute in strengthening public finances and will stay the course of fiscal consolidation path towards achieving a balanced budget by 2020”.
It’s a giant win for Malaysia, in particular with respect to the sentiment which has been overly negative
It said Fitch’s revised outlook “reflects the strong economic fundamentals and the sound financial position of the country”.
In July 2013, Fitch attached the “negative” outlook to Malaysia, and it suggested earlier this year there was a 50 per cent chance of a rating downgrade.
“It’s a giant win for Malaysia, in particular with respect to the sentiment which has been overly negative,” said Nomura economist Euben Paracuelles. “The move back to ‘stable’ corrects a lot of that.”
Fitch said Malaysia’s fiscal finances had improved and it viewed progress on the goods and services tax (GST) and fuel subsidy reform as supportive of the fiscal finances.