Moody’s Investors Service said it is maintaining its estimate of Malaysia’s direct government debt at 50.8% of GDP.<\/p>\n
In a statement released on Wednesday, Moody\u2019s said its assessment of contingent liability risks posed by non-financial sector public institutions has also not changed following some statements by the new Federal Government.<\/p>\n
\u201cHowever, the new administration’s treatment of large infrastructure projects that may be placed under review but have benefited from\u00a0 government-guaranteed loans in the past, and outstanding debt from state\u00a0 fund, 1Malaysia Development Bhd (1MDB, unrated), will play an important role in determining risks that contingent liabilities pose to the credit profile,\u201d it said.<\/p>\n
The report entitled, Government of Malaysia: FAQ on credit implications of the new government’s policies, also highlighted the importance of fiscal measures, given that the country’s high debt burden acts as a credit constraint.<\/p>\n
\u201cConsequently, to what extent the new government achieves fiscal deficit consolidation will be vital in gauging the eventual effects on Malaysia’s fiscal metrics and credit profile,\u201d said the report.<\/p>\n
On Goods and Services Tax (GST) abolishment, Moody’s said without effective compensatory fiscal measures, \u201cthis development is credit negative because it increases the government’s reliance on oil-related revenue and narrows the tax base\u201d.<\/p>\n
The estimated loss of revenue due to the scrapping of GST is around 1.1% of GDP this year \u2013 even with some offsets \u2013 and 1.7% beyond 2018, said Moody\u2019s, adding that this will put further pressure on Malaysia\u2019s fiscal strength.<\/p>\n
The reintroduction of fuel subsidies is always viewed as credit negative as they distort market-based pricing mechanisms.<\/p>\n
Both abolishment and GST and reinstatement of fuel subsidies will put a strain on fiscal position and the balance of payments while raising the exposure of government revenue to oil price movements.<\/p>\n
However, Moody\u2019s pointed out that the change in government will not materially alter growth trends in the near term, and the removal of the GST could boost private consumption in the short term.<\/p>\n
[Source 1<\/a>, 2<\/a>]<\/em><\/p>\n The change in government would not materially alter growth trends in the near term.<\/p>\n","protected":false},"author":9,"featured_media":22742,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[271,216],"tags":[],"class_list":["post-34663","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","category-news-updates"],"acf":[],"yoast_head":"\nImage from greece.greekreporter.com<\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"