Fitch Solutions: Malaysia’s economy expected to worsen as Covid-19 hits hard

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Malaysia’s economic outlook is going to worsen this year amid the Covid-19 pandemic, which has forced the government to impose a second movement-control order (MCO), predicted Fitch Solutions Country Risk and Industry Research.

The research arm of the Fitch Group slashed the gross domestic product (GDP) growth for 2021 from 11.5% to 10%, which will affect government spending.

“We have revised down our forecast to 10%, from 11.5% previously to account for the slower recovery due to muted private consumption as employment and wages are likely to once again come under intense pressure.

“This time with even less scope for fiscal support, given that government finances are already strained and close to the raised debt limit of 60% of GDP,” the group said in a statement today.

The group also said because of the decline in GDP growth, the government’s ability to spend, especially in the healthcare sector, which is already under strain, will be reduced further.

“A decline in GDP growth will further negatively impact the number of funds available needed to strengthen Malaysia’s healthcare system.”

Among the other observations by the Fitch Solutions include the number of Covid-19 cases will eventually paralyse the healthcare system, which has already been stretched.

“The surge in the number of Covid-19 patients will paralyse the existing capacity of the healthcare system. The Prime Minister (Muhyiddin Yassin) stated that Malaysia’s healthcare system is at its breaking point, as government hospitals are unable to support over 2,000 new positive Covid-19 cases per day.

“In the Klang Valley, the take-up of ICU beds for Covid-19 patients at Hospital Kuala Lumpur and Universiti Malaya Medical Centre have reached maximum capacity, while Sg Buloh Hospital has reached 83% of its total capacity,” the group found.

With the number of Covid-19 cases on the rise, Fitch Solutions also said the MCO will be extended.

Yusof Mat Isa

Fitch Solutions is a product of the Fitch Solutions Group Ltd (FSG), United Kingdom. FSG is an affiliate of Fitch Ratings Inc (Fitch Ratings).

Last December, Fitch Ratings agency downgraded the country’s long-term currency issuer default ratings from ‘A-’ to ‘BBB+’.

A “BBB” rating indicates that expectations of default risk are currently low and the capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are likely to impair this capacity.

However, Fitch Solutions today claimed the data used for the current study does not have any correlation with Fitch Agency’s data or the agency’s analysis of Malaysia.

“Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.” – TMI