Fitch Ratings lowered its outlook on Malaysia to negative from stable amid weaker prospects for budgetary and fiscal reform following its May elections. “Malaysia’s public finances are its key rating weakness,” Fitch said in a statement today, affirming the long-term foreign currency-denominated rating at A-. It will be difficult to achieve the 3 percent deficit target in 2015 without additional steps, while rising state subsidies also pose risks, it said. The government is planning cuts to subsides on essential items to address the deficit, Prime Minister Najib Razak said last month, without giving details. Najib led his Barisan Nasional coalition to victory in a May election with the help of a spending spree which included smartphone rebates for youths, household electricity subsidies and higher wages for civil servants. “There’s still been no timetable set for reducing the fuel subsidies or addressing the fiscal revenues,” said Chua Hak Bin, an economist in Singapore at Bank of America Merrill Lynch. “The current account could slip into a deficit in the second quarter. The rate at which it has deteriorated is of immense concern.” Malaysia may record an $800 million current-account deficit in the second quarter, the first shortfall since 1997, according to a July 26 research note from Bank of America. Malaysia’s 10-year government bonds fell, driving the yield to the highest level in more than two years, on concern global investors will repatriate funds after $2.9 billion of sovereign debt matures tomorrow, said Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. The yield on the 3.48 percent securities due March 2023 climbed 16 basis points, or 0.16 percentage point, to 4.09 percent as of 6:10 p.m. in Kuala Lumpur, data compiled by Bloomberg show. The ringgit was little changed.
Posted on: Wed, 31 Jul 2013 00:41:46 +0000
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