Asia Times: Malaysia's foreign currency rating upgraded



	November 13, 1999	atimes.com

Southeast Asia

Malaysia's foreign currency rating upgraded
KUALA LUMPUR - Standard & Poor's (S&P) upgraded Malaysia's long-term foreign currency sovereign and senior unsecured ratings to ''BBB'' from ''BBB-'' on Friday. S&P also upgraded Malaysia's local currency sovereign and senior unsecured ratings to ''A'' from ''A-'', the international rating agency said in a statement.

At the same time, S&P affirmed Malaysia's ''A-3'' short-term foreign currency rating and upgraded its short-term local currency rating to ''A-1'' from ''A-2'', while the outlook on the long-term ratings remained stable.

It said the upgrades reflected the country's stronger-than expected, export-led economic recovery, which in turn would help reduce fiscal pressures generated by bank and corporate restructuring.

Malaysia's investment-grade ratings reflected a solid international liquidity position, as the central Bank Negara Malaysia's foreign exchange reserves had far exceeded the country's gross external financing gap, at $32 billion by the end of the year. The gross external financing gap was expected to remain under $2 billion in the year 2000 as large current-account surpluses had persisted, S&P said.

Moreover, the build-up of international reserves should moderate the public sector balance sheet, despite the fiscal impact of bank recapitalization. Such recapitalization is expected to cost the government and bank shareholders about 22 percent of this year's gross domestic product (GDP).

The recovery of a resilient and open economy was underpinned by a gross domestic savings rate exceeding 35 percent of GDP; a diversified export base accounting for more than 110 percent of GDP; a skilled workforce; and well-developed infrastructure.

Nevertheless, S&P said: ''Trend output growth, which is about 5.5 percent annually, should lag behind growth rates in the 1990s, reflecting the lingering costs of restructuring.''

S&P added that the outlook balanced Malaysia's situation better than expected growth prospects, and it enhanced fiscal flexibility against limited commitment to market-based corporate practices. It said: ''Should that commitment grow and should political deepening take place, capital allocation could become more efficient, further improving Malaysia's growth prospects and sovereign credit standing.''

(Asia Pulse/Bernama)

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