World Economy

Escaping Middle Income Trap a Challenge for Malaysia

Escaping Middle Income Trap  a Challenge for MalaysiaEscaping Middle Income Trap  a Challenge for Malaysia

S&P Global Ratings expects that Malaysia’s objective to escape the middle income trap will continue to be a challenge while credit risk is high because of the country’s high private-sector credit level relative to income.

In its banking industry country risk assessment issued on Monday, it classified the banking sector of Malaysia in group “4” under its Banking Industry Country Risk Assessment, TheStar online reported.

Other countries in group “4” are Estonia, Kuwait, Mexico, New Zealand, Saudi Arabia, and Taiwan.

“The anchor for banks operating only in Malaysia is “bbb”. Our bank criteria use our BICRA economic risk and industry risk scores to determine a bank’s anchor, the starting point in assigning an issuer credit rating,” it said.

The international ratings agency said Malaysia’s modest income levels and vulnerability to global economic conditions constrain the country’s economic resilience.

“We believe that escaping the middle income trap would continue to be a challenge. Several factors temper these weaknesses: an open, diversified and competitive economy with a moderately flexible labor market; reasonably developed infrastructure; and a high savings rate,” it said.

S&P Global Ratings said credit risk is high because of Malaysia’s high private-sector credit level relative to income. This is partially mitigated by the financial buffers and healthy debt-servicing ratios of the country’s corporate sector.

Prime Minister Lee Hsien Loong said he expects Singapore’s economic growth this year to be at the upper end of the 2 to 3% range. The Singapore economy was Lee’s focus during his reception speech on Sunday as he met more than 250 Singaporeans based in the United States.

He is currently in the US for an official working visit at the invitation of US President Donald Trump. Lee’s optimism stems from strong third quarter results in areas such as manufacturing and services. The strong showing by the manufacturing sector helped Singapore’s economy grow 4.6% year-on-year in the third quarter from a year ago, advance estimates from the ministry of trade and industry  showed on Oct 13.

In August, the government narrowed the full-year growth forecast for the Singapore economy to 2 to 3%, from the earlier range of 1 to 3%.

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