Tweetchat: Yes it happened. Fitch downgrades Malaysia
Credit rating agency Fitch on July 30 has downgraded Malaysia’s credit rating outlook to negative from stable, causing the ringgit to decline the most in three weeks, bonds to extend losses and share prices of blue chips to slump.
Fitch, citing rising debt levels and a lack of budgetary reform, said that Malaysia’s public finances are its “key rating weakness.” The shrinking current-account surplus and rising sovereign debt raises the risk of capital outflows, putting the ringgit on course for its worst month in more than a year.
Investvine has repeatedly mentioned the obvious deterioration of Malaysia’s fiscal ecosystem in the recent past, and we will hold a Tweetchat on the issue on Friday, August 3, at 3pm Malaysia time. Please join under https://twitter.com/insideinvestor.
According to CIMB Equities Research, the other two big rating agency Moody’s and Standard & Poor’s are also likely to downgrade Malaysia’s sovereign credit rating outlook if there was no clear indications from the government on fiscal reforms regarding subsidies, taxes and government spending after the election.
Despite Fitch kept the country’s existing high investment-grade ratings of “A-” on long-term foreign debt and “A” on long-term local debt, its July 30 announcement triggered a flight of foreign funds out of the country on the very same day.
Federal government debt in Malaysia rose to 53.3 per cent of GDP at end-2012, up from 51.6 per cent at end-2011 and 39.8 per cent at end-2008. The general government budget deficit also widened to 4.7 per cent of GDP in 2012 from 3.8 per cent in 2011, led by a 19 per cent rise in spending on public wages in a pre-election year.
[caption id="attachment_13263" align="alignleft" width="300"] Malaysia's prime minister Najib Razak has come under pressure to speed up fiscal reforms[/caption] Credit rating agency Fitch on July 30 has downgraded Malaysia's credit rating outlook to negative from stable, causing the ringgit to decline the most in three weeks, bonds to extend losses and share prices of blue chips to slump. Fitch, citing rising debt levels and a lack of budgetary reform, said that Malaysia’s public finances are its “key rating weakness.” The shrinking current-account surplus and rising sovereign debt raises the risk of capital outflows, putting the ringgit on course for its worst...
Credit rating agency Fitch on July 30 has downgraded Malaysia’s credit rating outlook to negative from stable, causing the ringgit to decline the most in three weeks, bonds to extend losses and share prices of blue chips to slump.
Fitch, citing rising debt levels and a lack of budgetary reform, said that Malaysia’s public finances are its “key rating weakness.” The shrinking current-account surplus and rising sovereign debt raises the risk of capital outflows, putting the ringgit on course for its worst month in more than a year.
Investvine has repeatedly mentioned the obvious deterioration of Malaysia’s fiscal ecosystem in the recent past, and we will hold a Tweetchat on the issue on Friday, August 3, at 3pm Malaysia time. Please join under https://twitter.com/insideinvestor.
According to CIMB Equities Research, the other two big rating agency Moody’s and Standard & Poor’s are also likely to downgrade Malaysia’s sovereign credit rating outlook if there was no clear indications from the government on fiscal reforms regarding subsidies, taxes and government spending after the election.
Despite Fitch kept the country’s existing high investment-grade ratings of “A-” on long-term foreign debt and “A” on long-term local debt, its July 30 announcement triggered a flight of foreign funds out of the country on the very same day.
Federal government debt in Malaysia rose to 53.3 per cent of GDP at end-2012, up from 51.6 per cent at end-2011 and 39.8 per cent at end-2008. The general government budget deficit also widened to 4.7 per cent of GDP in 2012 from 3.8 per cent in 2011, led by a 19 per cent rise in spending on public wages in a pre-election year.
