Published on 17 Oct 2019.
RAM Ratings shared its views on Malaysia’s macroeconomic and sectoral outlook for 2020 at its annual credit summit, held in Kuala Lumpur on 16 October 2019. The principal themes discussed during the macroeconomic session centred on the key impact and risks for Malaysia arising from the ongoing US-China trade war and the global slowdown, along with how Budget 2020 will support growth going forward.
RAM has projected a marginally lower 4.5% GDP expansion for 2020 (compared to an estimated 4.6% for 2019). Further easing of monetary policy is on the cards while fiscal policy remains mildly growth-supportive. Against this backdrop, Malaysia will need to harness its inner strength from resilient domestic demand and accommodating policy measures to build a buffer against external challenges, which are likely to impinge on its growth next year.
At the same event, a panel session comprising economists and analysts also shared their views on the domestic and regional economies. The panellists concurred that global uncertainties will persist in the foreseeable future, although there is a silver lining - Malaysia has been performing relatively commendably to date.
Meanwhile, some of RAM’s senior analysts briefed investors on the outlook of the various sectors covered by the rating agency. Of the 11 broad sectors under its radar, automotive and commercial property remain on negative outlook while the rest - including power, telecommunications, toll roads and banking - are stable. The automotive segment is weighed down by keen competition in an increasingly more saturated market while the commercial property industry has been plagued by a glut of retail malls and office space.
On the other hand, the credit trends of RAM-rated issuers are generally stable, supported by their strong business profiles and credit metrics. The banking sector, a bellwether for the Malaysian economy, is envisaged to shift to a lower gear on account of slower growth. Even so, the incumbents are still well-capitalised while their asset quality remains intact despite some potential slippage. All said, about 93% of RAM’s rated entities are on stable outlook and the rating drift is anticipated to improve further next year.
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