News – Fitch:Malaysian growth supportive, but fiscal pressure remains

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The strong contribution of public-sector spending and investment to economic growth may sustain pressure on Malaysia’s public finances, Fitch Ratings says.

Below is the statement issued by Fitch on Monday:

Malaysia’s high level of trade openness exposes it to possible external growth shocks, such as that seen in 2009.

The fiscal space for further counter-cyclical stimulus at the current ‘A-‘ rating level appears limited in light of the continued deterioration in public debt ratios as well as the current strength of public sector economic activity.

Bank NegaraMalaysia said last week that the Malaysian economy grew by 5.4% in the second quarter. Q1 growth was revised up to 4.9%, from 4.7%.

Data clearly shows that, alongside robust private sector activity, public sector-linked activity has been a key driver of GDP growth for the last four quarters.

Public sector investment increased by 28.9% year-on-year in Q2, following a 10.3% year-on-year rise in Q1. The third and fourth quarters of 2011 both saw year-on-year public sector consumption increases of over 20%.