By Emily Chow
KUALA LUMPUR (Reuters) - Malaysian Prime Minister Najib Razak on Tuesday urged investors to move on from a multi-billion-dollar graft scandal at state fund 1MDB that has weighed on southeast Asia's third-largest economy, saying the country is now "stronger than ever".
The call comes a day after the International Monetary Fund upgraded its 2017 growth forecast for Malaysia to 4.8 percent from 4.5 percent, following better-than-expected first quarter annual growth of 5.6 percent, the quickest in two years.
Najib has resisted demands to step down over the last two years for his involvement in the scandal at 1Malaysia Development Berhad (1MDB), following reports that more than $700 million was deposited in his personal bank account.
Najib has denied any wrongdoing. The fund is the subject of money laundering investigations in at least six other countries. In civil lawsuits, the U.S. Justice Department alleged that about $4.5 billion was misappropriated from 1MDB.
"At 1MDB it is now clear there were lapses in governance," Najib told fund managers, industrialists and investors in a speech at the Invest Malaysia conference in the capital, Kuala Lumpur.
"However, rather than bury our heads in the sand, we ordered investigations into the company at a scale unprecedented in our nation's history."
A government investigation cleared Najib of any offence. A rationalization drive Najib kicked off at 1MDB, to sell its assets or move them to other state entities, is progressing well, he added.
But the prime minister's popularity also took a beating over allegations by his critics of mismanaging the economy, and the 2015 adoption of a new good and services tax that drove up living costs.
In the last two years, as the Malaysian economy and markets were rattled by a slowdown in China, slumping oil prices and the burgeoning 1MDB financial scam, foreign investors exited Malaysian equities, bonds and currency.
But this year's gradual recovery, on the back of growth in exports of energy and other commodities, helped strengthen the ringgit, which had lost around 4.3 percent of its value against the dollar last year, making it the third worst performing emerging Asian currency.
However the ringgit has recouped all of that, and a bit more in 2017, as the rallying greenback lost steam.
"All of this can point to only one conclusion – our economy continues to prosper, and we are stronger than ever as a result of the reforms and the programs the government has put in place," Najib, 64, said in his speech.
The prime minister may call elections in the next few months, government sources have said, earlier than scheduled in mid-2018, to exploit better economic conditions and disarray in the opposition alliance.
He blasted Malaysia's main opposition alliance, Pakatan Harapan, as a party "in chaos" and accused it of sabotaging the economy.
"There has been a concerted campaign to send such misinformation overseas to damage Malaysia's economy for their own selfish political objectives," said Najib.
Najib's comments reveal his "desperation" to hold on to power, said opposition leader Wan Azizah Wan Ismail.
"Najib Razak's shameful tirade against the Pakatan Harapan leadership reveals his desperation to go to any level to discredit the federal opposition," she said in a statement.
(Writing by Praveen Menon; Editing by Clarence Fernandez)