The Malaysian Insider, July 1, 2015
The Star, July 2, 2015
By Tan Sri Ramon Navaratnam
The Fitch's rating that upgraded our outlook on the long term issuer default rating from negative to stable is indeed a relief and quite gratifying.
The government, treasury, EPU and Bank Negara must feel considerable joy and some sense of achievement as they managed to persuade Fitch to give a positive grading.
This rating is especially significant as Fitch has threatened to downgrade Malaysia in their earlier assessment.
However, we should be cautiously optimistic and not be overjoyed as Fitch has actually warned that although our economic management has improved ,we still have some weaknesses to address.
We should therefore continue to manage these weaknesses more effectively, as we are just above water in our macro indicators.
Fitch showed that we are marginally better off, but definitely not completely out of the woods.
The economic and fiscal margins for manoeuvre and management are still too narrow for real confidence and comfort to consumers and investors.
For instance, Fitch clearly states that 'Malaysia`s fiscal position continues to remain weak ,as measured against the "A" median rating.
Government debt, as a share of gross domestic product (GDP) at the end of 2014, was 53.9% which is still above the `A` median of 47.2%.
Our GDP's budget deficit has fallen from 4.6% of to 3.8% in 2014.
This is creditable but we have to ensure we keep it lower, despite the many claims, with the elections not far away.
The balance of payments current surpluses continue to decline as the ringgit falls. Our exports do not rise fast enough, while our import prices rise further.
We are not well above and beyond safety margins.
Hence, any unforeseen contingencies can upset the apple cart and our calculations and confidence.
Fitch thinks that there is a high probability that sovereign support for 1MDB, would be forthcoming, if needed.
This can add to the uncertainties and causes more strain on the budget and economy.
We have to recognise more that we are living in globally uncertain times. Thus we would need to perform better, have stronger leadership and become more competitive and less corrupt.
In short we need more structural reform, to ensure sustainability and continued good ratings from Fitch and other international rating agencies.
Most importantly, we need more domestic and international confidence in our longer term socio-economic and political outlook.
Let’s not forget that our lowered national unity and rising racial and religious bigotry, would also undermine our national, international confidence – and our global ratings. – July 1, 2015.
* Tan Sri Ramon Navaratnam is chairman of ASLI Center of Public Policy Studies.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insider.
Please view the original article on The Malaysian Insider.
Please view the original article on The Star.
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