KUALA LUMPUR, June 29 (Xinhua) -- Standard and Poor's ratings agency has reaffirmed Malaysia's credit ratings with stable outlook under the country's new government.

The rating agency said in a statement Friday that it affirmed its "A-" long-term and "A-2" short-term foreign currency sovereign credit ratings, as well as "A" long-term and "A-1" short-term local currency sovereign credit ratings on Malaysia.

"The outlook on the long-term rating remains stable. The stable outlook reflects our expectation that Malaysia's strong external position, monetary flexibility, and well-established institutions will remain in place following the change in government," it said.

The rating agency highlighted that it may raise the ratings over the next 24 months if the strong economic performance observed over the last few years continues and in turn produces a fiscal performance that's better than it expected, reducing debt levels further than anticipated.

However, it said the ratings on Malaysia could face downward pressure if it assesses a weaker commitment to growth and fiscal consolidation that could in turn hurt the government debt standing.

"Our sovereign credit ratings on Malaysia balance the country's strong external position, monetary policy flexibility, and track record of supporting sustainable economic growth, against its elevated government debt stock, and evolving fiscal policy settings," it said.

On Malaysia's recent regime change, S&P Global considered Malaysia's institutions to have supported generally effective policymaking for a long time, and believed that the depth of capacity at these institutions will be sufficient to ensure an orderly power transition.

However, new ruling coalition Pakatan Harapan's campaign promises, many of which it has already begun to deliver, also present new challenges to the sovereign's fiscal position, the agency said

"For the time being, revenue measures will likely be insufficient to fully offset the implied shortfall resulting from zero-rated Goods and Service Tax (GST). However, we expect the new government to pursue meaningful expenditure rationalization," it said.

Thus, the re-calibration of the overall fiscal stance should allow the federal government to meet the 2.8 percent of its Gross Domestic Product (GDP) deficit target for 2018, it said.

The rating agency also projected Malaysia's real GDP growth to average 5.1 percent annually from 2018-2021, with continued support from private consumption, investment and exports.

Malaysia's real GDP growth accelerated to 5.9 percent in 2017.