Stable S&P rating backed by reforms, resilience - Finance Ministry

The Finance Ministry has lauded S&P Global Ratings’ recent affirmation of Malaysia’s sovereign credit ratings with a stable outlook.

The ministry said the affirmation reflects the international rating agency’s confidence in Malaysia’s strong macroeconomic management and more favourable growth prospects compared to peer economies.

“The government remains vigilant in managing the dynamic global economic environment, particularly shifting trade policies, while ensuring flexible and responsive policy implementation,” the ministry said in a statement today.

“Moving forward, the government will continue the comprehensive reform agenda outlined under the Madani Economic Framework to achieve higher growth, stronger economic resilience, and fiscal capacity.

“Additionally, the Public Finance and Fiscal Responsibility Act 2023 will ensure that fiscal consolidation remains on track while providing sufficient support to sustain economic growth,” it added.

The statement also quoted Prime Minister Anwar Ibrahim as saying that Putrajaya remains focused on improving the quality of life for the people and economic reform.

Such endeavours, Anwar said, will be carried out while ensuring responsible fiscal management.

“Although external conditions remain uncertain, we are committed to continuing reforms that will elevate Malaysia to a higher level,” added the prime minister, who is also the finance minister.

Key reasons

In a statement yesterday, S&P cited Malaysia’s diversified economy, steady political stability, sustainable growth momentum, and a balanced external position alongside narrowing fiscal deficits as key reasons for its rating.

The agency affirmed its “A-” long-term and “A-2” short-term foreign sovereign currency ratings, as well as its “A” long-term and “A-1” short-term local currency ratings, while the transfer and convertibility assessment was maintained at “A+”.

The agency also noted that political stability under Anwar’s administration has encouraged policy continuity, enabling ongoing economic reforms and fiscal consolidation.

“The stable outlook reflects our expectation that Malaysia's growth momentum and prevailing policy environment will allow modest improvements in fiscal performance over the next two to three years,” it said.

S&P also highlighted Malaysia’s resilient economy, monetary policy flexibility, and consistent current account surplus, supported by a strong export base, as major factors sustaining the rating.

Fiscal consolidation

At the same time, it acknowledged Malaysia’s commitment to fiscal consolidation through subsidy rationalisation and revenue broadening.

However, it said it may lower Malaysia’s ratings if the trend growth rate in real gross domestic product (GDP) per capita falls to levels comparable with peers, or if political instability causes policymaking to become materially less predictable.

The ratings could also be raised if fiscal outcomes outperform forecasts, supported by continuing political stability and a sustained narrowing of deficits to below three percent of GDP.

The Finance Ministry further said today that Malaysia’s economy expanded 4.4 percent in the first half of 2025, driven by resilient household spending, controlled inflation, robust labour market conditions, and strong domestic tourism.

Private and public sector investments, particularly in manufacturing, services, and infrastructure, are expected to sustain growth despite global uncertainties while GDP growth is projected between 4.0 and 4.8 percent in 2025.

The ministry also said Malaysia’s deep capital markets and sufficient reserves further underpinned the country’s financial stability.

COMMENT | Malaysia's strategic compass amid rising Eastern Bloc

Govt has reduced new debt, fiscal deficit declining, Anwar says

PAS delegate: Govt should take over rice, cooking oil industries again

Budget 2026 will strengthen housing reform, affordable homes: Amir