Moody's affirms Malaysia's A3 rating, maintains stable outlook

 

Moody's Investors Service has affirmed Malaysia’s local and foreign currency long-term issuer and local currency senior unsecured debt ratings at A3, with a stable outlook.

In a statement today, Moody’s said the rating affirmation is underpinned by its expectation that Malaysia's medium-term growth prospects would remain strong, and the country’s macroeconomic policymaking institutions would continue to be credible and effective, providing resilience to the sovereign credit profile.

“These strengths are, under Moody's baseline assumptions, balanced against the government's relatively high and increased debt burden, which will leave the government with weakened fiscal strength for some time in the aftermath of the pandemic shock to public finances,” it said.

In particular, while Moody's continued to expect the government to remain committed to its gradual path of fiscal consolidation over the next two to three years, it said the rise in debt burden was unlikely to rapidly reverse.

“The stable outlook reflects Moody's view that risks to the credit profile remain consistent with the A3 rating level based on current assumptions,” it said.

The credit rating agency did not expect the Covid-19 pandemic would have a sustained negative impact on Malaysia's economic model.

“As such, the current and any subsequent waves of infections will delay, but not materially hinder the economy's eventual return to high growth rates,” it said.

Meanwhile, Moody’s pointed out that the authorities' track record of effective macroeconomic policies, including prudent fiscal policies, had continued to lengthen, despite ongoing noise in the political landscape.

Concurrently, Moody's has affirmed the foreign currency ratings on the backed senior unsecured debt issued by the government’s special purpose vehicles, namely Malaysia Sovereign Sukuk Bhd, Malaysia Sukuk Global Bhd and Wakala Global Sukuk Bhd at A3.

“The associated payment obligations are, in Moody's view, direct obligations of the government,” it said.

Moody's has also affirmed at A3 the local currency ratings on the backed senior unsecured debt issued by Khazanah Nasional Bhd, which benefits from an explicit guarantee from the government.

Malaysia's local and foreign currency country ceilings remain unchanged at Aa1 and Aa2, respectively, it added.

- Bernama