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


Moody’s said the rating affirmation was underpinned by Moody's expectation Malaysia's medium-term growth prospects will remain strong and its macroeconomic policymaking institutions will continue to be credible and effective,

KUALA LUMPUR: Moody's Investors Service has affirmed the Government of Malaysia's local and foreign currency long-term issuer and local currency senior unsecured debt ratings at A3. The outlook remains stable.

In a statement issued on Thursday, Moody’s said the rating affirmation was underpinned by Moody's expectation Malaysia's medium-term growth prospects will remain strong and its macroeconomic policymaking institutions will continue to be credible and effective, which provides 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.

“In particular, while Moody's continues to expect the government to remain committed to its gradual path of fiscal consolidation over the next two to three years, the rise in debt burden is 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.

As for the Covid-19 pandemic, Moody's does not expect the coronavirus pandemic to have a sustained negative impact on Malaysia's economic model.

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

It also pointed out the authorities' track record of effective macroeconomic policies, including prudent fiscal policies, has also continued to lengthen, despite ongoing noise in the political landscape.

Concurrently, Moody's has affirmed the foreign currency ratings on the backed senior unsecured issued by Malaysia Sovereign Sukuk Bhd, Malaysia Sukuk Global Bhd, and Wakala Global Sukuk Bhd. -- special purpose vehicles established by the Government of Malaysia -- at A3.

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

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.

"The five-notch gap between the local currency ceiling and the sovereign rating is supported by predictable, transparent and effective policymaking institutions despite some political noise, as well as the country's strong external position," it said.

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