Malaysian long-term forex rating downgraded<\/p>\n
KUALA LUMPUR (AFP): Credit rating agency Standard and Poor's
\n(S&P) yesterday downgraded Malaysia's long-term foreign currency
\nrating outlook from \"stable\" to \"negative,\" dealing a fresh blow
\nto confidence in the economy.<\/p>\n
The U.S.- based agency said the downgrade was due to the
\nauthorities' \"evident reluctance\" so far to \"curb rapid credit
\ngrowth that is financing an unsustainable boom in investment,\"
\nnow more than 40 percent of gross domestic product (GDP).<\/p>\n
It also warned of the \"likelihood that bank asset quality will
\ndeteriorate significantly next year,\" estimating that total
\ncredit to the private sector and public enterprises -- a leading
\nindicator of asset-quality problems -- will exceed 170 percent of
\nGDP in 1997.<\/p>\n
This indicates a \"very high private-sector leverage,\" it said.<\/p>\n
S and P also cited the government's \"ambivalent commitment to
\northodox economic policies in the wake of volatility in the
\nforeign exchange and share markets,\" citing Kuala Lumpur's
\n\"flirtation\" with curbs on stock and foreign exchange trading.<\/p>\n
\"While none of these measures are expected to be implemented,
\nthey call into question the political commitment to conservative
\nfiscal management that in the past has helped underpin the
\nsovereign's credit standing,\" it added in a statement.<\/p>\n
S and P affirmed Malaysia's \"AA+\" long-term and \"A-1+\" short-
\nterm local currency ratings.<\/p>\n
It said future ratings would hinge on effective steps,
\nstarting with the 1998 budget proposal to be presented in
\nOctober, to slow excessive demand.<\/p>\n
The agency also called for \"renewed political support\" for
\nmarket-oriented policies and \"consistent recognition of the vital
\nrole of foreign investment in underpinning the country's future
\ngrowth.\"<\/p>\n
S and P urged \"effective steps\" by the government \"to contain
\nits exposure to weakening asset quality in the financial system.\"<\/p>\n
Prime Minister Mahathir Mohamad has alarmed foreign investors
\nwith controversial measures to restrict share trading, which he
\nlater lifted, and recently called for curbs on foreign currency
\ntrading as well.<\/p>\n
He has blamed foreign speculators for the Malaysian ringgit's
\n20-percent fall since July but his deputy and finance minister
\nAnwar Ibrahim has reassured the international banking community
\nthat foreign exchange trading will not be restricted.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/malaysian-long-term-forex-rating-downgraded-1447893297",
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