HONG KONG: The Malaysian government's financial strength and the country's open and diversified economy are supporting its A3 investment grade credit rating, Moody's Investors Service says in a report.
The country's worsening finances are sparking concern in financial markets that the government will have to spend more to boost an economy grappling with shrinking global demand.
The government has said it will revise down its 3.5 per cent economic growth forecast for the year, itself a revision down from an earlier forecast of 5.4 percent.
The official forecast is for the economy to register little growth in 2009 and some private sector analysts fear there will be a recession in Malaysia this year.
Even so, the rating agency said yesterday that the country's US$211 billion (US$1 = RM3.67) economy is twice as big as the median for A-rated countries and was quite well diversified.
It also said that Malaysia's external debt position is strong with its external debt service ratio of 3 per cent considerably better than the peer median of 6.3 per cent.
"The government's financial robustness is underpinned by the country's very strong external position and high savings rates," the agency said in a statement.
But it also warned that, "administrative short-comings and socio-political priorities have weakened prospects for stronger fiscal discipline and much needed structural reform that could have boosted private investment to a greater extent".
While noting that low private investment had pushed the government to spend more on subsidies and infrastructure in recent years, Moody's said falling commodity prices and slowing revenues would intensify the need for fiscal stimulus. - Reuters
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