RAM: Malaysia’s economy will grow 5.3pc this year

MALAYSIA’S economy is anticipated to grow by 5.3 per cent this year, from the expected 4.9 per cent gross domestic product (GDP) growth in 2012, according to RAM Rating Services Bhd.  It expects this year’s growth to be driven by the country’s sustainable domestic consumption and the resurgence of private sector investment.

Despite external demand pressures weighing on its exports, RAM believes that Malaysia will achieve 4.9 per cent GDP growth in 2012. RAM has assigned AAA long-term national ratings for Malaysia, with a stable outlook.

“Malaysia’s rating is anchored by its status as one of Southeast Asia’s most successful economies. Blessed with a wealth of natural resources that have long been the corner-stone of its economy, Malaysia has a well-developed industrial base and a commendable infrastructure network,” RAM said in a state-ment.

Besides Malaysia’s resilient economy that is supported by low and stable inflation, near-negligible unemployment and a young and expanding population, RAM said Malaysia’s exceptional liquidity position also features prominently as a key rating driver.  “Malaysia has had 14 consecutive years of current-account surpluses, which have facilitated a substantial build-up of foreign reserves, equivalent to roughly 10 months of retained imports as at end-August 2012.

“That, coupled with a relatively light external debt load, acts as a bulwark against external financial shocks, as evident during the global recession in 2009,” it said.  RAM said the government’s debt burden is moderately hefty but has nonetheless stabilised at around 52 per cent of GDP in the last two years.  With the acceleration of the Economic Transformation Programme that is designed to sustain Malaysia’s growth, RAM said the government should be able to comfortably manage its balance sheet, in contrast to many advanced economies that are saddled with substantial debt burdens that exceed their GDPs, high unemployment levels and feeble growth of less than two per cent.

Additionally, it said the Malaysian government enjoys a favourable debt profile, with long maturities and very little reliance on foreign-currency borrowings, given the depth of the domestic capital markets and the country’s high savings rate. Constrained by a relatively small revenue base and subsidies on basic food items and fuels, however, RAM said the country’s fiscal position has remained in deficit.

“This is a key moderating factor for the assigned ratings. On this note, the government has announced a deficit target of three per cent of GDP by 2015, which we believe is achievable on the back of the country’s sustainable growth,” it said.

Source: Business Times

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