Asia Times: Upgrade for Malaysia's sovereign risk rating



	September 22, 1999	atimes.com

Southeast Asia

Upgrade for Malaysia's sovereign risk rating

KUALA LUMPUR - Thomson Financial Bankwatch, the world's largest bank rating agency, has upgraded its sovereign risk rating for Malaysia to ''BBB'' from ''BB+'' with the ratings outlook categorized as stable.

Anand Adiga, sovereign risk analyst with Thomson, said in a statement on Tuesday that the ''upgrade is based upon the country's increased external financing flexibility, improved macroeconomic outlook and reduced political uncertainty''.

Nevertheless, Adiga said that the rating is constrained by the banking sector's continued weakness, perceptions of increased policy risk, vulnerability to adverse shocks from regional financial markets and some uncertainty over the economy's long-term growth prospects.

Despite these concerns, the agency said that Malaysia's external financing position has improved significantly, with the current account having swung from a sizeable deficit in 1997 to a large surplus of around 13 percent of Gross Domestic Product (GDP) in 1998. While this surplus will be smaller this year, it is still likely to be significant, due to the export sector's strong recent performance.

The country's foreign exchange reserves have also improved substantially, reaching $32.34 billion at the end of August. Besides this, the level of short-term debt has been reduced and stands at around $6.5 billion this year.

Consequently, the ratio of short-term external debt to foreign reserves, a key indicator of external vulnerability, now stands at only 20 percent, compared with 52 percent for Thailand and close to 60 percent for South Korea.

Malaysia's debt-servicing ratio for 1999 is also fairly low at 7.0 percent, compared with the corresponding figures of 14.5 percent for Thailand and 24.4 percent for South Korea. ''Together, these figures suggest that Malaysia is fairly well-positioned to deal, if necessary, with unexpected capital outflows,'' said Thomson.

(Asia Pulse/Bernama)

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