Standard and Poor's says it expects little appreciable policy risk from the transfer of power from Prime Minister Dr Mahathir Mohamad to his deputy Abdullah Ahmad Badawi next month.

Affirming Malaysia's foreign currency rating at BBB-plus and its local currency rating at A-plus, S and P said: "While Abdullah is likely to adopt a more consultative approach to governing, the policy direction set out under Mahathir's administration should remain broadly unchanged."

It expects the new administration under Abdullah to maintain a loose fiscal policy in view of a general election due by the end of next year.

The ratings are supported by ample external liquidity and a competitive export-oriented economy while constrained by a relatively high level of fiscal deficits and a still-high contingent risk to the public sector balance sheet, S and P said.

Mahathir, who retires at the end of October after 22 years in power, ended six years of pump-priming to cut a towering deficit and set the economy on a sustainable track for his successor in his final budget last week, analysts said.

The prudent 2004 budget pins growth at 5.5-6.0 percent, up from 4.5 percent in 2003, and aims to shrink the deficit to 3.3 percent of gross domestic product from 5.4 percent this year through a 21 percent drop in development expenditure. - AFP