Malaysia sees itself as AA-rated, Zeti says

Bank Negara Governor tells international press Malaysia is still capable of “very good growth.”

KUALA LUMPUR: Bank Negara Governor Zeti Akhtar Abdul Aziz was today quoted by Bloomberg as saying that Malaysia’s fiscal position was improving and that the Ringgit was presently undervalued.

She was speaking Saturday on the sidelines of a series of International Monetary Fund (IMF) meetings which she was attending in Washington, USA.

Bloomberg had reported on March 18 that ratings agency Fitch had said that Malaysia would sit “more naturally” with a BBB rating, suggesting that a downgrade was imminent. Malaysia is currently rated A-.

A “BBB” rating by Fitch is indicative of a “good credit quality” as compared with an “A” rating which points to a “high rating quality”.

Responding to the threatened downgrade, Zeti was quoted as saying, “When we look at our peers, and those in the AA rated, we see ourselves at least as good as that group.”

She also said that Malaysia’s current interest rates are accommodative and that current conditions allow Malaysia to maintain borrowing costs at present levels.

She, however, pointed out that the lack of momentum in global growth coupled with a lower domestic demand resulting from the imposition of the Goods and Services tax this month was affecting Malaysia’s economic outlook.

Anticipating a rate increase by the US Federal Reserve, she said that Asia as a region would remain resilient in the face of potential volatility which may arise.

“Because we are open, we are affected, but we bounce back quite quickly,” she suggested.

She said that the midpoint of Malaysia’s growth was likely to be at about 4.8 per cent claiming that lower oil prices were a major factor in the country’s economic slowdown.
“That would still mark very good growth,” Zeti claimed.

Explaining the central bank’s decision last month to keep its overnight policy rate at 3.25 per cent, she said that the rate was presently “accommodative”.

“It is a rate that is supporting the growth process,” she added, claiming that “the risk to higher inflation is not there”.