Are we at risk of being downgraded to junk status?
Malaysia faces the risk of having its bonds and credit status downgraded and declared as junk.
The downgrading of Brazil’s credit rating by the international ratings agency Standard & Poor’s has raised serious doubts among credit-default-swap (CDS) traders to unofficially downgrade nine emerging markets.
These include China and our own country.
That is why Datuk Seri Nazir Razak has described Malaysia’s credit standing and economic prospects as “worrying”.
He is so frank and right, too. I have been saying for some time now that Malaysia’s economic and financial fundamentals are only relatively strong now but that they have been steadily weakening. I have said that although Malaysia is not in crisis, it is nevertheless facing critical times.
But many of our top government economic and financial agencies and many economists keep insisting that our fundamentals are strong.
They give the impression that all is well with our economy and that we will ride the storm, although the ringgit keeps falling.
There has been a reluctance to speak up publicly, even with the rating agencies and also the World Bank.
However, the CDS traders have unofficially reduced their rating of Malaysia by six levels, from A3 to Ba3! As Nazir has advised, and hopefully his views would be taken more seriously than my humble concerns, we cannot afford to “ignore” these critical CDS assessments.
All these endangered and risk-prone emerging countries now suffer from the threats of falling commodity prices, including oil prices, plunging currencies and political turmoil.
Unfortunately, we have the added and worsening challenges of growing racial intolerance and religious bigotry.
It is not that our credit rating is at immediate risk of downgrading, nevertheless, we face the sad prospects of official downgrading if we do not take preventive and proactive action.
We should not be cavalier or complacent. We should not adopt the stance of the ostrich but that of our national symbol – the agile and alert tiger.
We should do all we can to strengthen our economy, to resist downgrading to junk status by the ratings agencies in view of the poor perceptions of international traders and global investors.
Indeed, we should regard this international rating risk as a challenge and a blessing in disguise. We have to fight hard like the tiger to overcome our structural socioeconomic and political weaknesses and political problems for the benefit of all Malaysians, long-term sustainability and greater success.
Article published on The Malaysian Insider.