KUALA LUMPUR: Moody's has maintained its A3 stable outlook for Malaysia as the outlook balances a resilient economy against structural fiscal challenges.
In its latest credit analysis update, it accessed Malaysia's economic strength as very high, institutional strength (high), fiscal strength (moderate) and susceptibility to event risk "moderate".
It also expects Malaysia to achieve a robust GDP growth of 4.3 per cent in 2017-2018, on the back of current account surpluses.
On the issue of external stability, it said the foreign currency reserves belies currency and capital flow volatility.
Although reserve adequacy has improved slightly, is still comparatively worse relative to Malaysia's A-rated peers.
It noted that the government is still committed to fiscal consolidation, with seven consecutive years (2010-2016) of narrowing fiscal deficits, which included cutting down expenditure to offset lower revenue.
It observed that the public debt burden likely peaked in 2015, registering just under 55 per cent of GDP, but debt affordability has continued to worsen.
It also noted that the reform momentum has stalled and Moody's does not expect any significant change before the next elections due by May 2018.
Factors that could prompt a positive rating action include a greater convergence in government debt metrics with similarly rated peers, accompanied by improvements in debt affordability and a reduction in the fiscal deficit.