Malaysia’s credit rating outlook revised to ‘stable’

SINGAPORE: Malaysia's credit rating outlook was changed to "stable" from "positive" by Standard & Poor's after the ruling Barisan National coalition suffered its worst election defeat in 50 years.

Credit default swaps on Malaysian government bonds rose to a record following the elections in March on concern the results would jeopardise Prime Minister Datuk Seri Abdullah Ahmad Badawi's position and delay his spending programme.

The revision "reflects the uncertainty brought about by the drastic change in the overall political landscape after the recent general elections," Sani Hamid, S&P's credit analyst, said. "Coming amid a challenging external environment and expectations of a slowdown in growth, prospects for a rating upgrade have diminished over the short term."

S&P said Malaysia's A- rating, the seventh-highest investment grade, reflects the improvement in its liquidity position. The country's foreign reserves increased to US$124 billion (RM405.48 billion) as of April from US$101 billion (RM330.27 billion) at the end of 2007, sufficient to finance 5.8 months of its current account payments.

"Malaysia's credit standing, however, is constrained by its fiscal position, where its deficit and debt levels are weaker than most of its peers," Sani added.

The central bank said in March the domestic economy may expand between five per cent and six per cent this year after growing 6.3 per cent in 2007. - Bloomberg