KUALA LUMPUR: The credit profile of Malaysia (issuer rating A3) is supported by the countryʼs "a1" economic strength, which reflects a large and diverse economy, Moody's Investors Service says.
It said on Friday the Malaysian economy boasts solid medium-term growth prospects and high levels of competitiveness.
“Its 'a2' institutions and governance strength, which balances solid executive and legislative institutions and a track record of effective macroeconomic policymaking against perceived weakness in the control of corruption and governance that will take time to address, as well as the slow pace of revenue-enhancing fiscal reforms that constrains fiscal policy credibility and effectiveness, ” it said.
Moody's said the governmentʼs "baa3" fiscal strength takes into consideration its moderately high debt burden and narrow revenue base that is partly reliant on petroleum and non-tax revenues, although the debt is predominantly denominated in local currency and the large domestic savings pool anchors funding costs and debt affordability.
“Its 'baa' susceptibility to event risks driven by external vulnerability, on account of the economyʼs exposure to volatile capital flows and sizeable short-term external debt liabilities, ” it said.
Moody's issued the statement after reviewing all of its ratings periodically in accordance with regulations – either annually or, in the case of governments and certain EU-based supranational organisations, semi-annually.
It said the review did not involve a rating committee, and the statement does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.
On Thursday, the World Bank said Malaysia’s economy is expected to grow by 6.7% in 2021, on the back of successful containment of Covid-19 infections and effective rollout and distribution of the vaccine.
The latest edition of the World Bank Malaysia economic monitor: Sowing the seeds, said quicker containment of the third wave of Covid-19 infections and vaccine distribution could lead to a faster-than-expected recovery in consumer demand, greater investor confidence and consequently a robust recovery in domestic economic activity in 2021.
“Signs of recovery are showing with Malaysia posting a smaller contraction of 2.7% in the third quarter of 2020, compared with 17.1% in the second quarter of 2020, ” it said.