It was clear that Budget 2021 would require unconventional thinking to address the high economic cost of the pandemic, said Liew Chin Tong.
- Fitch noted that Malaysia’s debt burden was about three times that of peers and 59.2% above the median for countries rated A-
- It also forecast that Malaysia would only return to growth in the medium-term rather than sooner, projecting a 4.6%expansion for 2022.
Liew was commenting on Fitch Ratings’ downgrade of Malaysia’s long-term foreign-currency issuer default rating (IDR) from A- to BBB+.
“The weaker-than-hoped Budget 2021 presented a few weeks ago is fiscally too conservative precisely to avoid this. Ironically, Fitch believes the budget deficit targets (6% this year, 5.4% in 2021) to be realistic, but nevertheless decided to issue a downgrade,” he said in a statement today.
“We now find ourselves in the worst-case scenario.”
He said the budget is too timid to ensure a strong recovery.
The downgrade would increase borrowing cost, which in turn will constraint the government’s ability to invest in the economy and create greater prosperity for all Malaysians.
Liew said the spending bill should have focused solely on doing what is right for the economy instead of trying to abide by the opaque and arbitrary rules of the rating agencies.
“That opportunity was missed, and ordinary Malaysians now risk being left to pay the price.”
Fitch said yesterday it downgraded Malaysia’s rating on the back of lingering political uncertainty and substantial impact of Covid-19 on the economy.
The Covid-19 crisis has also weakened several of Malaysia’s key credit metrics, it added.
The firm noted that Malaysia’s debt burden was about three times that of peers and 59.2 percent above the median for countries rated A-.
It also forecast that Malaysia would only return to growth in the medium-term rather than sooner, projecting a 4.6 percent expansion for 2022.