Moody’s Investors Service Sovereign Risk Group assistant vice-president and analyst Christian Fang said macroeconomic institutions had generally not been the target of politics.
Policies have remained sound despite a series of political changes that took place in 2018 and 2020, he added.
“Even with the abolition of the goods and services tax (GST) in 2018, there was still an appetite for fiscal consolidation by the fiscal authority,” he said at Moody’s Inside Asean Malaysia media roundtable held online today.
Fang was responding to questions on how the current political scenario in Malaysia would affect the country’s credit profile.
According to him, foreign investors have also not been deterred in any big way by the political changes in Malaysia.
“One could even argue that maybe some of the foreign investors are getting used to political noise, as this is something that you see in some developed markets, where sometimes a hung Parliament happens.
“Investors are aware of such structural issues,” he said, adding that such political noise is expected to stay in Malaysia and a stable long-term coalition might not be seen in the country, at least for a while.
“At the end of the day, the way we assess political risk is really towards the impact of politics on institutional effectiveness, macroeconomic policymaking and the investment climate.”
Going forward, Fang said Moody’s would continue monitoring how politics influenced policies and institutions.
On the impact of the Covid-19 vaccination programme on Malaysia’s economic growth, he said the country’s gross domestic product (GDP) was likely to accelerate faster than the 6% growth projected by Moody’s earlier.
“The sooner Malaysia achieves the target of getting 70% to 80% of its population vaccinated, which may optimistically be achieved by the end of this year, the quicker the economy will open and provide some upside to our GDP forecast.
“We think that once the economy reopens, Malaysia will show a high growth rate and that it will sustain its economic strength,” he added.
In terms of the Covid-19 impact on Malaysia’s credit profile, Fang said Moody’s usually looked at the medium-term growth prospects of a country.
“One year’s recession does not really affect our view of a country’s economic strength as we are looking at a 10-year average for GDP growth,” he said.