Malaysia to maintain robust growth, household debt remains high: Moody's
KUALA LUMPUR, Feb. 20 (Xinhua) -- Malaysia is expected to maintain the robust growth momentum but the high debt level in household sector poses credit challenges to the country, Moody's Investors Service said Tuesday.
In an annual update to investors, the rating agency said it believed the robust growth seen in the country in 2017 would likely continue into 2018 and over the medium term, supporting the sovereign's credit profile.
"Malaysia's GDP growth should average 5.2 percent in 2018, underpinned by a pipeline of large infrastructure projects that will stimulate public and private investment," it said. Malaysia recorded a GDP growth of 5.9 percent in 2017, according to the central bank.
Meanwhile, although household debt level in Malaysia has moderated, it is still relatively high given Malaysia's income levels. This trend may continue to pose challenges to the country's macro-stability, Moody's said.
Malaysia's outstanding household debt as at the end of 2017 was 84.3 percent of its gross domestic product, down from 88.4 percent as of end 2016. Moody's also said that although the trend of fiscal deficit reduction has been maintained in the country, the implementation of further fiscal consolidation remains a major credit challenge. Therefore, it sees a favorable debt structure and large domestic savings help to mitigate risks arising from a high government debt burden.
Despite current account surpluses, Moody's opined that Malaysia continues to be exposed to potential volatility in capital inflows, partly due to an active foreign investor presence.
Foreign reserve adequacy remains low when compared with A-rated peers, it added. According to the agency, Malaysia's A3 stable credit profile is supported by its large and diversified economy, ample natural resources and robust medium-term growth prospects.