For the second time this year, Malaysia’s short-term political risk rating has been downgraded. Tumbled energy prices continue indeed to negatively impact the economy – as oil & gas account for more than 10% of total exports – and foreign exchange reserves. Economic growth moderation is forecast to continue in 2016 (falling to 4.5% from 6% in 2014) on the back of continued low hydrocarbon prices and weaker Chinese demand. Poorer export data, capital outflows and central bank interventions to defend the Malaysian ringgit (MYR) have harmed Malaysia’s external liquidity. Foreign exchange reserves have indeed been curtailed by about 20% this year whereas external short-term debt remains heavy. Besides, the negative trend is exacerbated by a political crisis whereby Prime Minister Razak is embroiled via a financial scandal. That affects investor confidence and fuels the MYR depreciation which amounts to around 18% in 2015, i.e. the second sharpest drop among Asian currencies.
27 Apr 2020
Short-term political risk: multiple downgrades as emerging markets see liquidity squeeze amid covid-19 crisis
The current economic crisis provoked by the covid-19 pandemic combined with the commodity price shock is having a pronounced impact on the short-term ...
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