Malaysia keeps sovereign ratings unchanged, but outlook is mixed – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the recent assessment by credit agencies on the Malaysian economy.

Key Quotes

“Following the COVID-19 pandemic outbreak and announcement of the fiscal package by the Malaysian government, international rating agencies (S&P, Moody’s, and Fitch) affirmed Malaysia’s “A-/A3” sovereign ratings in their recent assessments. However, Fitch revised the country’s credit outlook to “negative” while S&P and Moody’s kept a “stable” outlook.”

“Fitch’s “negative” credit outlook was to reflect the high uncertainty from the COVID-19 pandemic that takes a toll on the domestic economy, export earnings, and public finances. The rating agencies also highlighted the risk of political tensions or instability on policy making and governance reforms.”

“The risk that a “negative” credit outlook will prompt a ratings action will depend on the extent of the downturn and pressure on the economic outlook, fiscal finances, and government debt levels. On the upside, a faster recovery that produces better fiscal performance which is accompanied by a transparent plan to resume fiscal consolidation from 2021 onwards could prompt an upgrade in the outlook or ratings.”