MARC Ratings has affirmed the state of Johor’s sub-sovereign credit rating at AAA with a stable outlook. This is an unsolicited rating based on public information. The rating reflects the state’s disciplined fiscal management, sizeable economy that is broadening into higher value–added activities, and stable political environment.
Johor is one of Malaysia’s largest state economies, contributing 9.8% of national gross domestic product (GDP) in 2025. The state’s economy expanded by 8.0% in 2025 (2024: 6.5%), outperforming the national growth rate of 5.2% and bringing its real GDP to RM170.9 billion. The services sector remained the principal driver of growth, expanding by 9.9% in 2025 and accounting for 54.8% of state GDP, led by the expansion of data centre and digital infrastructure capacity.
Johor’s proximity to Singapore continues to generate spillovers in trade, investment and services, now reinforced by the Johor–Singapore Special Economic Zone (JS-SEZ). Approved investments reached a record RM110.0 billion in 2025, the highest among Malaysian states, with about RM77 billion concentrated within the JS-SEZ footprint. The JS-SEZ, together with the state’s development pipeline and continued federal support, offers material upside to medium-term growth, economic diversification and revenue capacity. Realising these benefits, however, will depend on effective project execution, adequate administrative capacity and sufficient oversight to contain implementation risks.
The state’s prudent fiscal management is evident from it having recorded only one deficit between 2020 and 2024, which came amid a pandemic-related 14.7% fall in revenue in 2021. This prudence has not come at the expense of development, with development spending averaging 39.3% of total expenditure over the same period, well above the Malaysian state median of 27.5%. Johor’s accumulated fiscal surpluses lifted consolidated funds to RM2.8 billion in 2024 (2023: RM2.4 billion), equivalent to 138.3% of expenditure. Johor’s debt also remains among the lowest in Malaysia at 0.1% of GDP in 2024 (RM197.8 million), reflecting the state’s consistent repayments alongside set-off and debt forgiveness arrangements with the federal government.
Political stability provides further credit support, anchored by Barisan Nasional (BN), which has won the majority in all but one state election. In July 2026, BN won 48 of 56 seats (2022: 40), strengthening its majority position; this eases the passage of legislation, including the annual budget and development plans. The Menteri Besar’s reappointment for a second term and the retention of most of the state executive council should preserve policy continuity across key economic portfolios. Additionally, BN’s partnership with Pakatan Harapan (PH) in the federal Unity Government supports constructive federal–state relations.
The stable outlook reflects MARC Ratings’ expectation that Johor will sustain broadly balanced to surplus fiscal positions, preserve its reserve buffers and maintain a healthy pace of development spending. Continued revenue growth, supported by ongoing collection and land administration measures, should underpin the state’s fiscal performance. This is reinforced by Johor’s improving growth prospects and development agenda. Conversely, a sustained deterioration in fiscal performance, or a material drawdown in consolidated funds to finance an expanded development agenda, could pressure Johor’s credit profile.