KUALA LUMPUR, April 2 — Malaysia is still better off compared to Thailand, despite a slowing economy amid plunging oil prices, as the country is not ruled by a “repressive” military junta unlike the latter, a columnist for a Hong Kong-based paper wrote today.  

Nicholas Spiro, managing director of Spiro Sovereign strategy, a London-based consultancy that specialises in sovereign credit risk, said in an article published by the South China Morning Post that Thai assets remain resilient despite a coup last May more so because investors have grown used to such political instability.

“Malaysia’s economy may have faltered, but at least it’s not a military dictatorship,” Spiro wrote in the article titled “Malaysia and Thailand: A tale of two economies”.

“Although Thailand has a much stronger balance of payments position and is benefiting from cheaper oil, it is once again ruled by a repressive military regime that is suppressing — as opposed to resolving — the country’s deep-seated political problems,” he added.

Spiro noted that despite the coup in Thailand, investors are more concerned about Malaysia.

“As Asia’s sole net oil exporter, Malaysia has been hit hard by the collapse in oil prices since June. With oil- and gas-related activities accounting for nearly a third of the country’s fiscal revenues, Malaysia’s public finances and balance of payments position are deteriorating significantly,” he said.

Spiro pointed out that Bank of America Merrill Lynch has warned that the oil and liquefied natural gas price collapse will likely deliver a “severe negative shock” to Malaysia’s finances, investment and the current account.

Despite Malaysia’s economic and political troubles, Spiro noted that Thailand’s foreign holdings of local bonds increased by only 1 per cent since the end of 2013. — Reuters pic

He said the ringgit has fallen by a “staggering” 18 per cent against the US dollar since September and the country’s stocks have dropped 15 per cent over the past year. This is compared to the rise of 8.3 per cent for emerging Asian equities and a decline of 2 per cent for emerging market shares.

Spiro said Malaysia’s political risk is rising too, pointing to the debt-ridden 1Malaysia Development Berhad (1MDB) that is currently being investigated by the authorities, noting also that ratings agency Fitch has said it will likely downgrade Malaysia this year.

“The significant oil-driven deterioration in the fiscal and external balances precludes any budgetary stimulus, with the closely watched current account balance now at risk of swinging into a small deficit,” he said.

Despite Malaysia’s economic and political troubles, Spiro noted that Thailand’s foreign holdings of local bonds increased by only 1 per cent since the end of 2013, compared to 33 per cent in India and 58 per cent in India.

“Moreover, Malaysia is still an upper investment grade credit with an ‘A’ rating from all three main rating agencies, while Thailand is a lower investment grade one,” he said.