Kuala Lumpur: Maybank Research Pte Ltd has reaffirmed its position that Malaysia could achieve a positive rating from credit agencies such as S and P, Moody’s, or Fitch by mid-2026, contingent upon maintaining fiscal outperformance into 2025.

According to BERNAMA News Agency, Maybank Research noted that Moody’s and S and P currently rate Malaysia at ‘A3/A-‘, while Fitch rates the country slightly lower at ‘BBB+’, with all three agencies maintaining a stable outlook.

The research firm highlighted that for Malaysia to secure a positive rating action, further fiscal improvements will be necessary in 2025 to enhance the fiscal pillar score, which has been a limiting factor in the country’s credit profile. It was noted that while institutional profiles have remained stable, Malaysia’s economic resilience continues to support growth.

Public debt levels are projected to remain at or above 60% of GDP in the coming years unless there is a significant positive shift in GDP growth. Improving tax collection and increasing government revenue were identified as crucial steps to enhancing Malaysia’s credit rating prospects.

The government’s fiscal discipline has been evidenced by the reduction of the budget deficit to 4.1% of GDP in 2024, down from 6.4% in 2021. Although this remains higher than the pre-Covid level of 3.4% in 2019, further deficit reduction is anticipated in 2025. The medium-term fiscal framework aims for a gradual decline in the budget gap to approximately 3.0% of GDP by 2027.

Maybank Research also projected that the Malaysian Government Securities (MGS) and Government Investment Issue (GII) issuances will amount to RM164 billion gross and about RM80 billion net. This is intended to fund the RM80 billion budget deficit and RM83.5 billion refinancing for maturities, with the assumption that the government will achieve its deficit target of 3.8% of GDP in 2025.

The report further noted that no additional supply is expected to fund the rundown in Treasury Bills, as the outstanding amount has been significantly reduced to RM15 billion in December 2024 from RM31.5 billion in December 2022, representing a mere 1.2% share of total public debts. Additionally, the assumption is that the US$1 billion foreign currency bond maturing in April will be refinanced in US dollars; otherwise, the gross supply forecast would need to be adjusted upward by RM4 billion.