Malaysia’s central bank Governor Zeti Akhtar Azis criticised a decision by Fitch ratings agency to cut the country’s credit outlook to stable, saying the current account surplus would remain strong.
Fitch this week cut Malaysia’s outlook from positive and maintained its “A-minus” long-term rating due to slowing exports and lower commodity prices.
“We have stress-tested our current account and if commodity prices were to come down more and under extreme circumstances, the surplus that we have will still be about 10% of GDP,” Zeti told the Star newspaper in an interview.
Malaysia’s government is forecasting a current account surplus of 22.05 billion Malaysian ringgit for 2009, according to a preliminary draft of the 2009 budget.
In the first half of 2008, the surplus was 37 billion ringgit as exports were buoyed by surging oil and commodity prices, although the price of oil and palm oil have fallen sharply since.
In 2007, the country posted a current account surplus of 25.5% of gross domestic product and foreign exchange reserves are in excess of US$100 billion.
Zeti told the newspaper that Malaysia’s reserves were three times short-term debt and 1.5 times external debt and said that Fitch was overreacting, just as it had done during the 1998 Asian financial crisis.
“They have done the same they did in the previous crisis and they were also proven wrong,” Zeti told the paper.
Malaysian policymakers frequently criticise free market and International Monetary Fund policies after their experience in the 1997-98 Asian financial crisis in which they ignored IMF advice and saw their economy rebound strongly.