KUALA LUMPUR: Rating agency Standard & Poor's affirmed Malaysia's A- sovereign rating today based on its strong external position and monetary policy flexibility.
Despite its moderate fiscal deficits and government debt burden, these were two strengths which held the sovereign up.
It also said the ongoing corruption allegations of 1Malaysia Development Bhd (1MDB) will not affect current policy flexibility and responsiveness.
"Malaysia's strong external position, a result of many years of substantial current account surpluses, underpins the ratings."
This position can withstand a further slowdown in the oil and gas sector over the next two years.
Likewise, external indicators are likely to remain unchanged, given our assumption of continued healthy trade surpluses.
A weaker ringgit should support the competitiveness of Malaysia's manufactured goods, partially offsetting the impact of depressed energy prices.
It praised Bank Negara Malaysia saying its track record in controlling inflation, indicating strong monetary flexibility helps absorb major economic shocks.
" We project net general government debt will peak at 51 per cntof GDP in 2017, and expect it to modestly decline thereafter. "
Although general government fiscal position carries contingent risks which include guarantees on debts and letters of support (including the US$3 billion letter of support for 1MDB, which is a direct financial obligation of the government, it does not expect such contingent liabilities to materialise significantly within its forecast horizon.