KUALA LUMPUR– Fitch Ratings has affirmed Malaysia’s long-term foreign and local-currency issuer default rating (IDRs) at ‘A-‘ with stable outlook.

In a statement, the credit ratings agency said, Malaysia’s rating was supported by strong gross domestic product (GDP) growth compared with the median of ‘A’ category peers, sustained current account surpluses and the country’s net external creditor position.

However, the rating remains constrained by some structural metrics, including per capita GDP and governance indicators, that are weaker than the ‘A’ median and government debt that is somewhat higher than peers and could be affected by sizeable contingent liabilities, it said.

Fitch estimated average five-year real GDP growth of five per cent, well above the ‘A’ category median of 2.9 per cent.

Economic performance has been resilient over the past two years even as the economy has adjusted to a number of challenges including lower oil prices and volatile capital flows, it said.

Growth momentum has gained pace in 2017 and Fitch has raised its full-year GDP growth forecast to 5.1 per cent from 4.5 per cent previously.

Private consumption spending received a boost in 2017 from a 15 per cent increase in cash transfers under BR1M (a cash transfer programme of the government aimed at lower income households) and exports have strengthened, it said.

Fitch said it expected the government’s target for a federal government deficit of three per cent of GDP in 2017 to be achieved, with a slight further narrowing in the next two years.

As a result, federal government debt will stabilise at around 52 per cent of GDP in 2017 and 2018, below the authorities’ self-imposed debt ceiling of 55 per cent but moderately above the ‘A’ median of around 49 per cent, it said.

Meanwhile, the ratings agency said, Malaysia’s external account remained in a net external creditor position, supported by large private external assets.

We expect the current account to remain in surplus at almost two per cent of GDP over the forecast period as resilient export performance is forecast to counter strong import growth associated with capital goods related to infrastructure projects, it said.

It said Malaysian banks’ asset quality and capitalisation levels remained reasonably healthy.

Household debt levels were high, at 86.7 per cent of GDP in the first quarter of 2017 but reasonably strong employment and income growth countered some of the risk for the banking sector from high household debt, it said.