KUALA LUMPUR (Jan 23): Malaysia’s credit rating plays a key role in ensuring the sustainability of its economic growth story, according to Permodalan Nasional Bhd (PNB) chairman Tan Sri Abdul Wahid Omar.

“The strategies have always been to manage the economy to ensure sustainability. That is in terms of the credit ratings. If we don’t manage our finances well, we risk being downgraded in terms of our credit ratings. At A-/A3, that has enabled Malaysian to borrow at reasonable levels. So this is very important,” Wahid told the reporters on the sideline during Invest Malaysia 2018.

Standard & Poor (S&P)’s credit rating for Malaysia last stood at A- with a stable outlook. Similarly, Fitch’s credit rating for Malaysia was also reported at A- with stable outlook, while Moody’s credit rating for Malaysia was last set at A3 with stable outlook.

Earlier this morning, Prime Minister Datuk Seri Mohd Najib Abdul Razak emphasised the importance of ensuring Malaysia’s sovereign credit ratings remain within the A band by keeping the country’s deficit low.

Wahid agreed with what Najib has said and pointed out that the risks of a downgrade would lead to an increase of borrowing costs, which would eventually affect corporate earnings and the economy.  

“If our credit ratings were downgraded, our costs of borrowings would have gone up. That’s something which must be averted. It’s a holistic package, the macroeconomy, the monetary policy, the fiscal policy, and of course the performance of the corporate sectors, which is also very important,” he added.

The government’s efforts to diversify the income base by reducing the dependency on natural resources such as the oil & gas industry, as well as the plantation sector, has helped keep the Malaysia’s economy resilient. 

Wahid noted those were tough measures but necessary to be implemented for the country to move forward.

With the global economic recovery seen over the last one year, Wahid said it has also benefited the Malaysian economy and capital market, pointing to the positive impact on the FBM KLCI, which rose by about 9% in 2017.

For 2018, he noted that the numbers have been good so far in January and expectation is that momentum will continue.

“We hope corporate sectors will do well in 2018 to enhance their revenue, optimise their costs, generate better earnings and with that, pay more dividends to shareholders. That will include PNB that will benefit the 13.2 million unitholders that we have,” he said.

As for the ringgit, Wahid is hopeful it will recover and remain strong on the back of its fundamentals, pointing to increase in the current account surplus as a percentage to the gross domestic product (GDP) in 2017, as well as positive investment flows.