KUALA LUMPUR: Fitch Ratings said Malaysia's public finances remain stable despite a decline in revenue from the oil and gas sector.
Malaysia is also better placed than other commodity exporters to cope with lingering effects of the negative shift in its terms of trade, it said in its comment on the 2017 Budget, which was unveiled last Friday.
Malaysia is the largest net exporter of petroleum and natural gas products in Southeast Asia, and its finances have not been immune to the effects of the collapse in prices.
“The fall in commodity revenue has not triggered a rating downgrade,” says analyst Sagarika Chandra, in a statement.
The sovereign has kept its 'A-' rating, which has been on stable outlook since mid-2015.
“GDP growth has remained a credit strength despite the negative terms-of-trade shock.”
The rating agency expects the economy to grow by around 4.0 per cent in 2016 and 2017, which is at the bottom of the government's 4.0 per cent to 5.0 per cent target range for 2017 but above the median of Malaysia's rating peers.
The government estimates that oil and gas revenue will account for just 14.6 per cent of total revenue in 2016, down from 30 per cent just two years earlier while dividends from Petronas, are forecast to fall to RM13 billion (US$3.1 billion) in 2017 from RM16 billion in 2016 and RM29 billion in 2014.
On the fiscal deficit target for 2017 set at three per cent of GDP, Fitch Ratings said the target is achievable although it expects it to come in at 3.2 per cent of GDP.
“We believe it is unlikely that the target will be missed by enough to push public debt above the self-imposed ceiling of 55 per cent of GDP,” she said, adding that federal government debt will remain under 54 per cent of GDP at end-2016.
Fitch Ratings also said the impact of the 1 Malaysia Development Berhad (1MDB) affair on government policy making, political stability, and fiscal finances has been limited so far, but it remains a source of uncertainty.