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Nikkei Markets

S&P Keeps Malaysia's Investment-Grade Rating Steady On Prudent Budget Expectation

By Kuala Lumpur Newsroom
Nikkei Markets
KUALA LUMPUR (Jun 22) -- S&P Global Ratings today kept its investment grade credit rating on Malaysia amid expectation that authorities will continue to implement prudent budgetary and economic policies, and that the country's economy will grow at an average annual rate of over 4% until 2020.

The ratings agency affirmed its 'A-' long-term and 'A-2' short-term foreign currency sovereign rating on Malaysia, as well as 'A' long-term and 'A-1' short-term local currency rating. The outlook on the long-term rating remains stable.

"Our sovereign credit ratings on Malaysia reflect the country's strong external position and monetary policy flexibility, as well as sound growth prospects," S&P said. "Uncertainty connected to upcoming parliamentary elections could put upward pressure on the cost of refinancing the economy's gross external financing needs, despite Malaysia's overall strong net external position."

Although Malaysia's institutions have shown a strong track record of growth during the oil price shocks through 2014 and 2015, the approaching parliamentary elections could slow the pace of adjustment by delaying plans to further reduce energy subsidies and to restore fiscal space, the rating agency said.

Ongoing political challenges stemming from graft allegations against state-run 1Malaysia Development Bhd., combined with the next elections, pose potential challenges to the sovereign rating over the near-to-medium term, S&P said.

These challenges could manifest in the form of a rise in the cost of refinancing Malaysia's sizable gross external financing needs, or through non-resident outflows from Malaysia's deep local-currency government bond market, the agency said.

While, stronger economic growth, combined with the government's efforts to reduce the level of public debt to GDP may lead to a rating upgrade, any sharp increase in liabilities could lead to a downgrade in ratings, S&P added.
- By Kuala Lumpur Newsroom; kleditorial@NikkeiNewsRise.com; +60320267363
- Edited by Mrigank Dhaniwala
- Send Feedback to feedback@nikkeinewsrise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd.

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