THE long-serving Bank Negara Governor Tan Sri Zeti Akhtar Aziz rarely shows her displeasure in public.
But last week was an exception, when she openly questioned the basis of Fitch Ratings’ possible downgrade of Malaysia’s sovereign rating, despite the country’s strong economic fundamentals.
“When we look at it against our peers, we are at least as good as or even better in terms of growth prospects and performance because we have a solid financial system, our fiscal position had shown a track record of reduction in deficit and our external debt is relatively low compared with some of our peers,” she was reported as telling the Invest Malaysia forum.
“The question is: what has been the basis of that outlook?”
Malaysian policymakers had privately voiced their concern over the latest stance adopted by Fitch, one of the three big rating agencies in the world, the other being Moody’s, and Standard & Poor’s.
One cabinet minister, who met with the top guns at Fitch in New York six months ago, said the rating agency was never negative on the 1Malaysia Development Bhd issue.
Rather, he was told that Fitch’s main concern was the so-called mounting household debts in Malaysia. That concern was again misplaced.
Data showed that the country’s household assets to household debt ratio stood at 214 per cent last year, meaning Malaysian households have a high level of asset ownership relative to their debt level.
This should not be an area of concern at all. We are unlike the United States, which, a few years ago, suffered the sub-prime mortgage crisis that led to plunging property prices, a slowdown in the US economy and billions in losses by banks. That crisis stemmed from a fundamental change in the way mortgages are funded.
There has been a flurry of good news lately. The ringgit is currently at a two-month high against the US dollar and the government revenue growth, while hit by lower crude prices, is still outpacing the increase in public spending after adjusting for inflation.
And, in a clear mark of foreign confidence in the Malaysian economy, the government’s global sukuk issuances of US$1.5 billion (RM5.37 billion) recently were oversubscribed by up to seven times.