S&P maintains M’sia’s credit rating on strong external position
KUALA LUMPUR: Standard & Poor’s Financial Services LLC (S&P) affirmed Malaysia’s short-term foreign currency sovereign credit rating at ‘A-2’ and its long-term rating at ‘A-’, with a stable outlook on the long-term rating, as it expects the fall in oil prices will not disrupt Malaysia’s long-term fiscal consolidation.
“We believe the economy can withstand some weakness in the energy sector owing to its fairly diversified and broad-based growth,” said S&P in a statement yesterday.
Based on that, it also affirmed its long-term ‘A’ and short-term ‘A-1’ local currency ratings on Malaysia, as well as its ‘axAAA/axA-1+’ Asean regional scale rating on Malaysia.
“In our view, the decline in oil prices has a moderate negative impact on Malaysia’s fiscal position, given that government revenue has a high dependence on the energy sector,” said S&P.
It also noted that it has lowered its oil price assumptions — it expects Brent oil prices to average US$55 (RM195.80) per barrel in 2015 and US$70 per barrel in 2015-2018.
“However, we believe the decline in oil prices will not derail Malaysia’s long-term fiscal consolidation efforts. The country’s strong external position can absorb some weakness in the oil and gas sector,” it added.
S&P also commended the Malaysian government for having been proactive in mitigating the fallout of the slump in oil prices, and expects Malaysia to maintain its long-term target to balance the federal budget by 2020.
“Malaysia’s strong external position, a result of years of current account surpluses, underpins the ratings,” the ratings agency stressed.
S&P also noted that Malaysia has a high degree of monetary flexibility, and that its central bank’s track record in controlling inflation indicates strong monetary flexibility that attenuates major economic shocks.
“Malaysia also has a deep domestic bond market, compared with most of its peers, which reduces its reliance on external financing,” it added.
However, S&P cautioned that the continuing increase in contingent liabilities and other forms of off-budget financial support could offset the benefits of its fiscal consolidation efforts.
“We view the government’s guarantees on debts (including letters of support such as that behind the US$3 billion bond issued by 1Malaysia Development Bhd) as direct commercial financial obligations of the government should these entities fail to pay,” it remarked.
Moving forward, S&P said it would raise Malaysia’s ratings should Malaysia be able to further reduce its deficits and deliver stronger economic growth.
http://www.theedgemarkets.com/en/node/184030
KUALA LUMPUR: Standard & Poor’s Financial Services LLC (S&P) affirmed Malaysia’s short-term foreign currency sovereign credit rating at ‘A-2’ and its long-term rating at ‘A-’, with a stable outlook on the long-term rating, as it expects the fall in oil prices will not disrupt Malaysia’s long-term fiscal consolidation.
“We believe the economy can withstand some weakness in the energy sector owing to its fairly diversified and broad-based growth,” said S&P in a statement yesterday.
Based on that, it also affirmed its long-term ‘A’ and short-term ‘A-1’ local currency ratings on Malaysia, as well as its ‘axAAA/axA-1+’ Asean regional scale rating on Malaysia.
“In our view, the decline in oil prices has a moderate negative impact on Malaysia’s fiscal position, given that government revenue has a high dependence on the energy sector,” said S&P.
It also noted that it has lowered its oil price assumptions — it expects Brent oil prices to average US$55 (RM195.80) per barrel in 2015 and US$70 per barrel in 2015-2018.
“However, we believe the decline in oil prices will not derail Malaysia’s long-term fiscal consolidation efforts. The country’s strong external position can absorb some weakness in the oil and gas sector,” it added.
S&P also commended the Malaysian government for having been proactive in mitigating the fallout of the slump in oil prices, and expects Malaysia to maintain its long-term target to balance the federal budget by 2020.
“Malaysia’s strong external position, a result of years of current account surpluses, underpins the ratings,” the ratings agency stressed.
S&P also noted that Malaysia has a high degree of monetary flexibility, and that its central bank’s track record in controlling inflation indicates strong monetary flexibility that attenuates major economic shocks.
“Malaysia also has a deep domestic bond market, compared with most of its peers, which reduces its reliance on external financing,” it added.
However, S&P cautioned that the continuing increase in contingent liabilities and other forms of off-budget financial support could offset the benefits of its fiscal consolidation efforts.
“We view the government’s guarantees on debts (including letters of support such as that behind the US$3 billion bond issued by 1Malaysia Development Bhd) as direct commercial financial obligations of the government should these entities fail to pay,” it remarked.
Moving forward, S&P said it would raise Malaysia’s ratings should Malaysia be able to further reduce its deficits and deliver stronger economic growth.
http://www.theedgemarkets.com/en/node/184030
