Tuesday 05 March 2002


S&P raises Malaysia's outlook

In a boost for Malaysia, the international ratings agency Standard & Poor's yesterday raised the country's long-term rating outlook to positive from stable, citing an improving economy and corporate debt restructuring efforts.
Hopes for a balanced budget by 2004, continued fiscal flexibility, easing pressure on the ringgit peg and low external debt levels were also cited as causes for the decision, S&P said in a statement.
Some economists said the upgrade was no surprise.
``Malaysia has been making all the right moves, so this is within expectations and well-deserved,'' said regional economist Nizam Idris of IDEAglobal in Singapore.
The upgrade comes a week after the government announced that Malaysia posted growth of 0.4% in 2001, avoiding an economic contraction.
Prime Minister Mahathir Mohamad has said he expects gross domestic product growth of 3% this year, slightly more conservative than private economists' average estimate of around 3.5% growth.
``GDP growth this year will pick up as a result of overall global demand picking up,'' said Sanjeev Sanyal, regional economist at Deutsche Bank in Singapore. ``Asia in general and Malaysia in particular will benefit from that.''
Financial markets are closely watching for a decision on talk that Malaysia has reopened its 10-year sovereign dollar bond due in 2011, for $500 million.
But analysts have long concurred Malaysia has ample room to widen its external debt via loans or bond issues _ federal government external debt is expected to have risen to 6.8% of GDP in 2001 compared with 5.5% in 2000.
S&P also cited recent progress on government's redoubled efforts to tackle stubborn corporate debtors.
``A number of large and previously politically well-connected corporations were renationalised to replace existing management-owners, to quicken debt restructuring and to dispose of non-core assets,'' the statement said.
The government recently acquired United Engineers Malaysia Bhd from shareholders and, with it, control of the debt-laden Renong Bhd group. It also bought back money-losing Malaysian Airline Systems Bhd.