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KUALA LUMPUR, July 2, 2015:
The upgraded sovereign credit outlook to ‘stable’ by Fitch Ratings reflects Malaysia’s strong economic fundamentals, said Franklin Templeton Investments.
Executive director and head Malaysia fixed income and sukuk, Hanifah Hashim said the economy would remain resilient in macroeconomic terms, given its positive gross domestic product (GDP) growth, low inflation and a sustained positive current account balance, despite challenging external environment.
“We think the Malaysian economy can absorb the headwinds from current external risks.
“Regulators are likely to maintain prudent monetary policies to sufficiently mitigate the adverse impact of a negative trend in the external sector, in particular, due to commodity and currency weakness,” Hanifah said in a statement.
She said the external environment would likely remain challenging over the near to medium-term, due to low commodity prices and global pressure from the likelihood of an interest-rate hike in the US.
Despite external challenges, she said Malaysia’s economy would remain healthy over the longer-term as the impact of oil prices and the country’s fiscal deficit position would begin to narrow as planned.
The country’s fiscal deficit trend has been narrowing, from 7% of GDP in 2009 to 3.5% in 2014.
Hanifah said given the government’s prudent economic policy reforms, which included the removal of the fuel subsidy, the implementation of the goods and services tax and major spending cuts, would help buffer the impact of oil price weakness.
Meanwhile, other international ratings agencies such as Standard and Poor’s has maintained Malaysia’s sovereign credit outlook at ‘stable’ while Moody’s remained ‘positive’.