CDS Spread Does not Reflect Economy's Strong Long-Term Fundamentals: Treasury Sec-Gen

KUALA LUMPUR, Sept 26 (Bernama) -- The government will continue to monitor external developments and brace itself for any eventuality by ensuring that it has sufficient policy options to mitigate adverse impacts on the country, Treasury Secretary General Mohd Irwan Serigar Abdullah said Saturday. He said the government is aware that Malaysia’s credit default swap (CDS) spreads have been volatile and widened recently. "The CDS spreads respond to immediate market news and reflect the views of market players. Thus, the recent movements do not reflect Malaysia's underlying economic strength. "Credit rating agencies take a more balanced and longer term view of the economy and public finances," he said in a statement. Mohd Irwan said sovereign ratings are much more stable and based on economic fundamentals. The strong headwinds due to a potential interest rate increase in the US, the impact of policy divergence in advanced countries, China’s slower than expected growth, coupled with prolonged low commodity prices are expected to affect emerging markets including Malaysia, he added. "The government is realistic in assessing the impact of these developments and is focused on strengthening the resilience of the economy. "In this regard, it established the Special Economic Committee on Sept 1, 2015, to seek diverse and expert views for immediate and medium-term recommendations to further strengthen Malaysia's fundamentals," he said. The Malaysian economy remains strong, growing by 5.3 per cent in the first half of 2015 amid modest global growth, he said, adding the resilience of the Malaysian economy to weather external risks has strengthened over the years largely due to the more balanced and diversified economic structure. "Growth was driven by resilient domestic demand and supported by strong fundamentals of the economy as well as an accommodative monetary policy. "The strategies, programmes and projects under the 11th Malaysia Plan will further strengthen the growth trajectory towards becoming a developed and high-income nation by 2020," he said. He said Malaysia’s fundamentals and growth prospects have been acknowledged by credit rating agencies, with Fitch reaffirming Malaysia’s sovereign rating at A and revising the outlook from negative to stable in June 2015, while in July 2015 S&P reaffirmed the rating at A and kept the outlook stable. Moody’s currently rates Malaysia at A3 with a positive outlook. Mohd Irwan said the reaffirmation of Malaysia’s credit rating reflects a fair and balanced view of the government’s commitment to implementing sound macroeconomic policies and fiscal reform initiatives. -- BERNAMA