Spending may not affect Malaysia rating:S&P

Published: 2009/03/11

SINGAPORE: Standard & Poor’s said Malaysia’s latest economic stimulus package, worth RM60 billion (US$16.3 billion), may not affect the country’s sovereign rating despite a widening budget deficit. 

Malaysia yesterday unveiled the new spending plans, which will be put into action over two years, in an attempt to save jobs and prop up an economy teetering on the edge of recession. 

“They have some capacity to allow the budget to weaken in this downturn to an extent that would be consistent with the present rating,” David Beers, S&P’s global head for sovereign ratings, said in an interview today. 

“For most governments, the deficits are going to be wider this year but we are not downgrading everybody,” he said, adding that he was more concerned about a country’s ability or willingness to rein in spending once the economic crisis had passed. 

The new package, which comes on top of a RM7 billion plan announced in November, could widen Malaysia’s budget deficit to 7.6 per cent of gross domestic product from 4.8 per cent, analysts at OCBC in Singapore said. 

Beers also said he did not foresee India keeping its budget deficit in check due to a lack of political will. 

He said weakness in currencies such as the Korean won and British pound was positive because it cushioned the impact of the global economic downturn on those countries. 

Malaysia has an A-minus foreign currency rating from S&P with stable outlook, while India’s rating is BBB-minus with a negative outlook, which meant the rating agency could downgrade the country in coming months. - Reuters