KINIBIZ International ratings agency Moody’s Investors Service today revised Malaysia’s sovereign outlook from ‘positive’ to ‘stable’ and affirmed the Malaysian government’s issuer and senior unsecured bond ratings at A3.

The first key driver of the outlook revision is the deterioration in Malaysia’s growth and external credit metrics due to external pressures over the past year. Secondly, Moody’s was also concerned over macro-financial risks posed by system-wide leverage, which remains high.

Thirdly, Moody’s expectation is that despite progress on fiscal consolidation, Malaysia’s public debt burden and debt affordability will see only limited improvement over the outlook horizon.

“The decision to stabilise Malaysia’s A3 government bond rating at A3 rather than at A2 balances the negative impact of changes in the external environment on Malaysia’s growth, external balance and reserves since the assignment of a positive outlook in November 2013, together with the risks posed by existing domestic imbalances, against the positive impact of the fiscal consolidation seen since then,” Moody’s said in a statement today.

According to Moody’s, the assignment of a positive outlook to Malaysia’s A3 government bond rating reflected Moody’s view that continued improvements in the government’s balance sheet could further enhance Malaysia’s fundamentals.

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