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Home›Economic Contraction›M’sienne economy on track for stronger recovery this year

M’sienne economy on track for stronger recovery this year

By Amber C. Lafever
March 14, 2022
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PETALING JAYA: RAM Ratings sees Malaysia’s economic recovery on a firmer trajectory in 2022 with a growth forecast of 6.8% with a downward bias, seeing the resumption of all economic activities and healthy external demand, except for short-term volatilities and the impact of the Russo-Ukrainian War, which he is watching closely.

“Although Malaysia’s commercial ties with the two countries are limited, a protracted war would cause inflationary shocks (due to soaring commodity prices) and supply chain disruptions, dampen global demand and pose financial market instability risks for growth,” he said in a statement today.

Given the still-challenging growth outlook and uncertainties, RAM’s ratings shares remained marginally negative in 2021 with six downgrades and five upgrades, according to its Corporate Defaults and Ratings Transition Study. However, given the rating outlook revisions, he noted that the year had turned out to be positive, with a total of 11 positive shares against eight negative shares.

“Looking forward, net rating action could still be negative as issuers with negative outlooks outweigh those with positive outlooks 3:1 at the end of 2021,” the rating agency said. .

It recalls that no issuer default was recorded during the year. As a result, all credit risks in RAM’s rated portfolio remained contained.

RAM said about 80% of rated issuers have AA or better ratings, indicating strong creditworthiness and an ability to meet their obligations in a timely manner.

“Only a very small number of issuers are considered to be at high risk of default over the next 12 months (about 2% of total issuers at end-2021). These high-risk issues are mainly covered by credit support of guarantors rated at least AA1, which mitigates the investor’s expected loss in the event of default.

Overall, he sees Malaysia’s 3.1% growth in 2021 as a welcome contrast to the 5.6% contraction recorded for 2020, although lower than the originally forecast expansion of 6.5% at 7.5%.

The economy grew 7.1% in the first half of 21 on robust exports, but fell in the third quarter following a surge in Covid-19 infections that prompted the reimposition of movement controls.

RAM explained that the strong vaccination campaign enabled the economy to subsequently reopen and that heavy government stimulus and aid packages worth RM530 billion helped cushion the impact negative impact of the pandemic, allowing the country to end the year on a positive note.

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