News Analysis

Economic, political wins give Najib breathing space

Malaysia's Prime Minister Najib Razak.
Malaysia's Prime Minister Najib Razak.PHOTO: AFP

Fitch's upgrade of Malaysia outlook among good news for the leader

It has been a year to forget so far for Prime Minister Najib Razak, but the fasting month of Ramadan has handed the Malaysian leader a fortnight of victories on both economic and political fronts, culminating in Tuesday's boost from ratings company Fitch.

The Premier has suffered relentless attacks on several fronts, with influential predecessor Tun Dr Mahathir Mohamad leading calls for him to resign. But Fitch Ratings' surprise upgrade on Monday of its Malaysia outlook from negative to stable has boosted the ringgit and the stock market index gained 1.5 per cent yesterday. The currency had earlier this week slid to a fresh 10-year low against the US dollar.

The good news comes after Datuk Seri Najib last week postponed Umno party polls until mid-2018, ensuring there is no formal challenge to his leadership before the next general election.

And state investor 1Malaysia Development Berhad (1MDB) has been making progress to cut its huge debts, thus helping the embattled Prime Minister for a change. Concerns over the

RM42 billion (S$15 billion) debt that 1MDB piled up in its first five years had been a lightning rod for attacks on Mr Najib, who chairs the Finance Ministry-owned firm's advisory board.

  • Raya comes early for Najib

    1: Fitch Ratings upgrades its credit outlook for Malaysia from negative to stable.

    2: Fitch affirms Malaysia's budget deficit and government debt reduced to 3.8 per cent and 53.9 per cent of GDP last year.

    3: Concerns over fallout from 1MDB default eased after it shed some RM16 billion of its RM42 billion debt.

    4: Postponed Umno polls to end of current parliamentary term seen as forcing PM Najib's party to consolidate behind him.

    5: Attacks from critics might be blunted after Fitch's upgrade, and with some doubts raised over claims of abuse of 1MDB funds.

    6: Fitch raises ratings outlook for Petronas to stable from negative. The national oil company contributes about 30 per cent of government revenue.

Mr Najib now has short- and long-term opportunities to deal with these issues and recover lost ground. The postponed Umno polls could force his colleagues to rally behind him as the ruling Barisan Nasional coalition can ill-afford to slip further, having secured only 47 per cent of voters in 2013.

Mr Wan Saiful, chief executive at the Ideas think-tank, said that given the vindication of Malaysia's fiscal position, the government might want to reduce taxes in its 2016 budget announcement in October as a quick fix, as it is "positive on the economy and people can feel it immediately".

"What he doesn't want is for there to be silence (in criticism) for three weeks, then noise again for another six months. He needs to use the breathing space he has now to show he can do better to improve things," he added.

A version of this article appeared in the print edition of The Straits Times on July 02, 2015, with the headline 'News Analysis Economic, political wins give Najib breathing space'. Print Edition | Subscribe