Kuala Lumpur: Moody’s Investors Service has maintained its credit rating for Malaysia at A3 stable, with a stable outlook, as it does not expect the Covid-19 pandemic to 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, the rating agency said in a statement Thursday.
“The authorities’ track record of effective macroeconomic policies, including prudent fiscal policies, has also continued to lengthen, despite ongoing noise in the political landscape,” it said.
However, it said upward pressure on the rating would develop if prospects for fiscal consolidation were to improve significantly, particularly through measures that broadened the currently narrow revenue base, pointing to a sustained decline in the government debt burden and improvement in debt affordability.
Moody’s said further enhancements to the institutional framework that were to raise governance standards and to result in increased policy credibility and effectiveness, including in the management of public finances, and boosting Malaysia’s potential growth would also be credit positive.
“A downward pressure on the rating would stem from a further weakening in the government’s debt and debt affordability metrics, a sharp rise in contingent liabilities, and/or a softening of the commitment to medium-term fiscal consolidation that were to result in continued deterioration in the government’s fiscal strength.
“Volatile politics that undermined the credibility and effectiveness of institutions, and threatened the stability of capital flows would also be credit negative,” it said.
In the context of the longer-term uncertainty over global trade patterns and supply chains, Moody’s said weaker medium-term growth prospects, including through structurally lower investment, would additionally put downward pressure on the rating.
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