KUALA LUMPUR (Sept 19): S&P Global Ratings has affirmed its sovereign credit ratings for Malaysia, and kept its outlook stable despite near-term headwinds from global trade uncertainty. It cited the country's steady growth momentum, balanced external position and ongoing fiscal consolidation efforts as key factors supporting its decision.

In a statement, the rating agency affirmed the country's 'A-' long-term and 'A-2' short-term foreign currency ratings, along with its 'A' long-term and 'A-1' short-term local currency ratings.

This is in line with ratings by other agencies. Moody’s last rated Malaysia at 'A3' with a stable outlook, and Fitch Ratings rated the country at 'BBB+', also with a stable outlook.

S&P noted that Malaysia’s near-term growth prospects face headwinds from slowing external trade and new US tariffs on certain exports. However, it said the country’s diversified economy and resilient policymaking environment continue to underpin its credit profile.

The agency projected the country’s gross domestic product (GDP) growth to moderate to 4.2% in 2025 from 5.1% in 2024, before averaging 4.4% annually through 2028.

By comparison, Bank Negara Malaysia in July revised its 2025 growth forecast to 4.0%-4.8%, taking into account the impact of new US reciprocal tariffs on Malaysian goods. The central bank had previously projected a higher range of 4.5%-5.5%.

S&P highlighted that fiscal consolidation is gradually taking hold, supported by subsidy rationalisation and broader tax measures, including enhancements to the sales and service tax.

Net general government debt is expected to ease slightly to 70.5% of GDP in 2025, while the current account surplus is forecast to stabilise at 2.3% of GDP over the next three years.

“Malaysia’s steady growth momentum and balanced external position, alongside narrowing deficits, will hold over the next two years,” S&P said.

The agency cautioned, however, that the ratings could come under pressure if political stability weakens or if the trend growth rate in real GDP per capita falls to levels closer to peers.

Conversely, S&P said ratings could be raised if fiscal outcomes outperform forecasts, including a sustained reduction in deficits to below 3% of GDP.

“We could also raise the ratings if Malaysia’s external settings improve from current levels, including a significant decline in the ratio of gross external financing needs to current account receipts and usable reserves to well below 100% on a sustained basis,” it added.