KUALA LUMPUR: Moody’s Investors Service is maintaining its estimate of Malaysia’s direct government debt at 50.8% of GDP in 2017.
It said on Wednesday 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 led by Pakatan Harapan which won the 14th General Election on May 9.
“However, the new administration’s treatment of large infrastructure projects that may be placed under review but have benefited from government-guaranteed loans in the past, and outstanding debt from state fund, 1Malaysia Development Bhd (1MDB, unrated), will play an important role in determining risks that contingent liabilities pose to the credit profile,” it said.
Moody’s said fiscal measures are a particular area of focus, given that the country’s high debt burden acts as a credit constraint.
“Consequently, 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,” it said in a report entitled: “Government of Malaysia: FAQ on credit implications of the new government’s policies”.
Commenting on the impact of the new government’s removal of the country’s goods and services tax (GST), Moody’s said in the absence of effective compensatory fiscal measures, “this development is credit negative because it increases the government’s reliance on oil-related revenue and narrows the tax base”.
Moody’s estimated revenue lost from the scrapped GST would be around 1.1% of GDP this year — even with some offsets — and 1.7% beyond 2018; further straining Malaysia’s fiscal strength.
On the planned reintroduction of fuel subsidies, it viewed this as credit negative because subsidies distort market-based pricing mechanisms.
The move could alsostrain both the fiscal position and the balance of payments while raising the exposure of government revenue to oil price movements.
On the growth outlook, Moody’s pointed out the change in government will not materially alter growth trends in the near term. The removal of the GST could boost private consumption in the short term.
“However, a review of large infrastructure projects could also result in any pick-up in investment being more spread out than Moody’s had previously anticipated,” it said. – ANN
About the RM1 trillion bullshit and borrowing from Japan
This story today doesn’t make our Finance Minister Lim Guan Eng looks very good.
That’s because.
which is about 65 % of GDP.
i know, he did some spins about the figure after that but that’s just sounded lame to me.
That’s why the former finance minister,
excerpts;
Najib, who was previously also Finance Minister, said he was glad that Finance Minister Guan Eng chose to come clean on the official federal government debt by stating that the official federal government debt remains at RM686.8 billion or 50.8 per cent of the Gross Domestic Product (GDP).
“(And) not 65 per cent of GDP or RM1 trillion as previously claimed.
“The level of 50.8 per cent is much lower than the 103.4 per cent reached during the first reign of Tun Dr Mahathir Mohamad,” said Najib.
Najib said his administration had always complied with international public debt reporting guidelines as defined by the IMF and World Bank.
“Therefore, the figure of 50.8 per cent is a universally accepted measurement,” he added.
He said contingent obligations, such as guarantees, have never been included in the official measurement of government debt, not even during Dr Mahathir’s previous reign
So, based on the report today, Moody’s has confirmed that Najib was right and Guan Eng was wrong about the national debt.
It’s not RM1 trillion as claim but a reasonable RM686.8 billion or 50.8 per cent of GDP.
Let’s compare that to my favourite foreign country Japan.
excerpts;
The Japanese public debt exceeded one quadrillion yen or about US$10.46 trillion in 2013, more than twice the country’s annual gross domestic product.[1][2] By 2015, the figure rose to US$11.06 trillion. As the country adopted key economic initiatives, this figure start to dip so that by the end of December 2017, the debt stood at US$9.94 trillion.[3]
In August 2011, Moody’s rating cuts Japan’s long-term sovereign debt rating by one notch to Aa3 from Aa2 in line with the size of the country’s deficit and borrowing level. The large budget deficits and government debt since the 2008-09 global recession and followed by earthquake and tsunami in March 2011 contributed to the ratings downgrade. In 2012 theOrganization for Economic Cooperation and Development (OECD) Yearbook editorial stated that Japan’s debt “debt rose above 200% of GDP partly as a consequence of the tragic earthquake and the related reconstruction efforts.”[4] Due to the ballooning debt, former Prime Minister Naoto Kan called the situation “urgent.”[5] Indeed, by 2014, Japan had the world’s highest debt per GDP.[6][7]
Well, compared to Japan’s, I think Malaysia’s debt is not so bad.
Maybe this is not such a good idea
That’s because the Japanese public debt is up to 200% of their GDP while ours is only at 50.8 per cent of our GDP.
Maybe the economists among readers of this blog may want to comment….how?
-https://lifeofaannie.blogspot.com/
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