An economist has urged the government to focus on battling Covid-19 instead of concentrating on perceptions of the country’s debt burden in global financial markets following Fitch Ratings’ downgrade of Malaysia last week.
Lee Hwok Aun of Singapore’s ISEAS–Yusof Ishak Institute said the revised rating was only the opinion of Fitch.
“It’s still too early to be taken as an accurate and strong assessment,” he told MalaysiaNow.
Fitch, an international credit rating agency, downgraded Malaysia’s Long Term Foreign Currency Issuer Default Rating on Dec 4 from A- to BBB+.
Lee said Malaysia should fight the Covid-19 pandemic with an eye to the management of economic affairs, budget allocations and assistance for the people above other matters.
“This is to protect the welfare of households, employment and businesses, and to generate jobs ensuring the goals of education and the public health sector.”
Fitch, in a statement last Friday, said the depth and duration of the Covid-19 crisis had weakened several key credit metrics.
Adding that the impact on the economy had been substantial, it said while the government had secured passage of core legislation to implement relief measures, including the 2021 budget, “lingering political uncertainty following the change in government last March weighs on the policy outlook as well as prospects for further improvement in government standards”.
This saw Pakatan Harapan (PH) calling for a motion of confidence against Prime Minister Muhyiddin Yassin in the current Parliament sitting which will run until Dec 17.
In a statement on Monday, the coalition said the downgrade was a huge blow to the government, particularly Finance Minister Tengku Zafrul Aziz.
Zafrul in turn said PH was irresponsible for politicising the issue.
He said PH’s stand on the issue was inconsistent as on Aug 24, its chairman Anwar Ibrahim had said that the rating should not be a concern as the focus should be on revitalising economic growth.
He also said Fitch had downgraded 100 other countries this year including Britain, Hong Kong, Chile and Laos.
Economist Madeline Berma of Universiti Kebangsaan Malysia said the assessment of credit agencies was a perception which most countries were not bothered about.
Madeline, who is also a commissioner on the government’s Human Rights Commission (Suhakam), said Fitch’s downgrade was a minor hurdle as Malaysia still depends on foreign investments for its economic recovery from the Covid-19 pandemic.
She said the downgrade to BBB+ would likely have two impacts on the economy, on the ringgit value and the view of foreign investors.
However, she added that the downgrade is to be expected given that countries around the world have sustained heavy economic damage from the pandemic.
“It’s been a long time since our rating value went down,” she told MalaysiaNow.