Malaysia’s Diversified Trade Will Help Cushion Dispute Effects
Fitch Ratings affirmed its stable outlook of Malaysia with an "A-" rating, stating that while the country will be affected by existing trade tensions, a diversified export base will help reduce the impact of external headwinds.
According to The Star, Fitch said the trade war beatings that Malaysia will experience is imminent as with other countries around the world who have business deals with China and the U.S. On the other hand, the country's trade diversion is among the key factor that will help the Malaysian economy brace itself for the trade war's impact.
The international rating agency noted that while trade tensions may "have a detrimental effect" on the Malaysian economy, "it also has a well-diversified export base, which helps cushion the impact from a potential fall in demand in specific sectors."
Fitch experts are leaning on a potential slowdown in Malaysian economic growth but the next few years could be brighter. Public investments could help raise activity in infrastructure projects that are stalled and these could help bolster the economy.
There are some ways through which the Malaysian government under Prime Minister Tun Dr. Mahathir Mohamad can further help cushion the effects of external beatings and increase the rating to "A" if possible.
The rating agency noted that if the country will work hard and faster to implement reforms under some segments in finance, the overall financial business environment will improve. Reforms in checks and balance policies will also help up the country's credit profile.
Local economists have urged the Malaysian government to take note of Fitch's recommendations. While the rating agency said that the country appears to be on the right path, it also pointed out that it has high public debt figures.
Analysts believe Malaysia should manage its budget more carefully and strive for more solid revenues. They said the government should first try to look for ways to derive funding from domestic channels and reduce borrowing.
Finally, analysts said the Mahathir administration should heed Fitch's advice on observing how other ASEAN member countries are dealing with governance issues. Singapore has one of the most well-rounded governing bodies in the region.
Experts have been watching Mahathir's government for the past year. He won by a massive margin last year, paving the way for hopes that Malaysia will see a recovery. He asked for patience and understanding from the Malay people after data suggested that citizens had lower confidence in his government.
On Thursday, the aged prime minister was asked if he had anything to say about the ongoing issues that his Pakatan Harapan government's partner, PKR, is going through. "I have lots of other things to think about," Mahathir stressed.
Experts believe Mahathir is more focused on the bigger issues that his economy is faced with. On the other hand, he did say that the PRK's troubles will be dealt with "in the future."