KUALA LUMPUR: Rating agency Moody's Investors Service has affirmed Malaysia's sovereign ratings at A3 and changed the outlook to stable due to slowing growth and the impact of the external issues on its external balance and reserves.
It expects that despite progress on fiscal consolidation, Malaysia's public debt burden and debt affordability will see only limited improvement over the outlook horizon.
On the outlook revision from positive to stable, it said:
"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."
It had assigned a positive outlook in November 2013, which saw further fiscal consolidation, including through the implementation of a goods and services tax (GST) and the rationalisation of fuel subsidies.
"However, the impact on the government's balance sheet has been, and will continue to be, limited," it warned.
External environment changes have also undermined Malaysia's external position, with large capital outflows, a falling current account surplus, sharp exchange rate depreciation and falling reserves.
And alongside rising external exposure, material domestic imbalances continue to pose a risk to growth and the financial system.
Household debt levels remain high by the standards of Malaysia's peers, it added.
Moody's also affirmed the A3 senior unsecured ratings to the US dollar trust certificates issued by Malaysia Sovereign Sukuk Berhad, a special purpose vehicle established by the Government of Malaysia.
It also affirmed the instrument ratings on senior unsecured debt issued by Khazanah Nasional Berhad at A3.