MALAYSIAS improved external financial position and its electronics sectors ability to wea-ther global market volatility are underpinning its Baa1 sovereign credit rating, according to Moodys Investors Service.
The international credit rating agency said this in its annual report on Malaysia released in Kuala Lumpur yesterday.
It said that efforts to hurry along corporate restructuring and strengthen the banking system also supported a rating that put it in the low-risk investment grade bracket.
Upgraded in September last year, Malaysias creditworthiness for the foreign currencys long-term debt is rated on par with Chile, two notches ahead of Thailand but one behind South Korea, Hong Kong and China.
According to Moodys, Malaysias current account recorded large surpluses for the past five years and another smaller surplus is expected this year.
A RM4.9bil February trade surplus reported on Tuesday was Malaysias 64th in a row.
Moodys said that Malaysias liquidity position was healthy, with short-term external debt having declined to a low level, and international reserves, put at US$34.7bil on March 14, remaining relatively high.
Progress in corporate restructuring and a strengthened banking system are further factors supporting the ratings, Moodys vice- president Steve Hess said in a statement released by the agency. The balance of payments outlook remains satisfactory.
According to Moodys, Malaysias economy has been affected by the global slowdown in demand for electronics product and by low levels of capital inflows.
Gross domestic product (GDP) growth, near zero in 2001, improved in 2002, but looks likely to remain below the rates recorded prior to the Asian financial crisis of 1997/98. Bank Negara has forecast GDP growth of 4.5% this year, slightly above 4.2% seen in 2002.
The government had run a fiscal deficit over the last several years and a sizable imbalance is expected this year.
Moodys said that the ratio of government debt to GDP was still manageable, but room for manoeuvre was diminishing.
Over the medium term, the major challenges for Malaysias external position are to maintain its position as an important recipient of direct investment and to make the corporate sector more competitive, Hess said. The government is undertaking measures to do both, with new policies on corporate governance and efficiency that may go far to create more positive business conditions.
The government is also expected to an-nounce a stimulus package on April 7, but any extra spending is not expected to bust the fiscal deficit, which Bank Negara expects to turn out around 4% of the GDP or below. Reuters
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