The global rating company also projects a 5% GDP growth next year.

Yesterday, the global ratings agency’s latest report on Malaysia revised the long-term sovereign credit ratings outlook to ‘stable’ from ‘negative’, citing Malaysia’s ‘strong economic recovery path’ compared to other nations of similar income levels.

In a statement responding to the outlook, finance minister Tengku Zafrul Abdul Aziz said the GDP forecast aligned with the expectations for higher growth as anticipated by the government and Bank Negara Malaysia.

S&P has also affirmed the ‘A- long-term and ‘A -2’ short-term foreign currency sovereign credit ratings as well as Malaysia’s ‘A’ long-term and ‘A-1’ short-term local currency ratings.

“The stable outlook reflects our expectations that Malaysia’s steady growth momentum and strong external position will remain in place over the next two years,” the rating agency said in a statement.

S&P said an upward revision of ratings is possible, if the nation achieves better fiscal settings, as reflected in net debt stock falling below 60% of GDP or interest payments less than 10% of general government revenues.

Tengku Zafrul said the government remains fully committed to fiscal consolidation and ensuring fiscal sustainability.

Supported by the gradual implementation of the Medium-Term Revenue Strategy, which aims to improve the country’s revenue base, the government will resume its consolidation path gradually and strategically.

This will balance short-term fiscal requirements with long-term fiscal and economic sustainability.

One key effort towards this is the proposed enactment of the Fiscal Responsibility Act by end-2022.

However, S&P warned that Malaysia may see its ratings lowered if political instability affects policy-making or if real GDP per capita growth is hindered by a prolonged downturn.