KUALA LUMPUR (April 23): S&P Global Ratings said Malaysia is unlikely to get a credit rating upgrade in the next 1–2 years unless it strengthens its external financial indicators, which have been affected by heavy foreign inflows into its bond market, while also maintaining strong economic growth and fiscal discipline.

For now, the rating agency has an A- rating with a stable outlook for Malaysia.

S&P Global Ratings managing director and sovereign ratings sector lead Kim Eng Tan said Malaysia’s bond market is attractive to foreign investors, but heavy foreign inflows can weaken some external financial indicators. While this shows strong investor interest, these weaker metrics still affect Malaysia’s overall credit profile.

"If these metrics were to improve, it could potentially, in a material and sustainable way, help to improve Malaysia’s overall metrics. So I think it is unlikely that there will be an upgrade in the next one to two years,” Tan said at a forum titled “Pricing Risks, Seizing Opportunities”, jointly organised by S&P Global Ratings and RAM Ratings on Thursday. He added that a rating upgrade is likely if the economy remains resilient and the fiscal deficit falls below 3% of gross domestic product (GDP).

Official advance estimates by the Department of Statistics Malaysia showed that Malaysia’s economy grew 5.3% in the first quarter (1Q) of 2026 from a year earlier. Final 1Q figures are scheduled to be released on May 15.

The government had earlier forecast GDP growth of 4% to 4.5% for the year.

Meanwhile, Malaysia’s fiscal deficit is expected to narrow further to 3.8% in 2025 and 3.5% this year supported by government reforms including subsidy rationalisation and a broader sales and service tax (SST) base.

The government has targeted a deficit of below 3% by 2028, while keeping federal debt below 60% of GDP.

Though the current energy crisis poses downside risk to Malaysia’s economic growth, “the impact is not broad-based and remains largely anecdotal”, said UOB Malaysia senior economist Julia Goh, adding that she expects the economy to stay stable for now, with manageable inflation.

Goh expects Malaysia’s economy to grow about 4.5% this year, with headline inflation around 2% and Bank Negara Malaysia to keep the overnight policy rate (OPR) at 2.75%.

She said economists are being more cautious in changing forecasts this year. Last year, concerns about tariffs led to quick downward revisions, but the impact was later smaller than expected due to policy changes and supply chain adjustments, so growth turned out stronger than initially predicted.

“We will monitor April–May data following weaker March figures to gauge the extent of the impact,” she added.