SINGAPORE, March 20 (Bernama) -- Moody's Investors Service says the Government of Malaysia's 'A3' issuer rating and stable outlook balance a resilient economy against structural fiscal challenges posed by the trend deterioration in revenue, as well as signs of weakening institutional strength.
Moody's conclusions are contained in its just-released credit analysis titled "Government of Malaysia -- A3 Stable" which examines the sovereign in four categories: economic strength, which is assessed as "very high (-)";
institutional strength "high (+)"; fiscal strength "moderate (+)"; and, susceptibility to event risk "moderate (-)".
Moody's said the report constitutes an annual update to investors and is not a rating action.
It said Malaysia should achieve robust gross domestic product growth of 4.3 per cent in 2017-2018 and continued current account surpluses.
On external stability, it said, the stability in Malaysia's foreign currency reserves belies currency and capital flow volatility.
The reserve adequacy has improved slightly, it said.
Moody's said the Malaysian government has demonstrated its commitment to fiscal consolidation, with seven consecutive years (2010-2016) of narrowing fiscal deficits, involving a curtailment of expenditure to offset the continued weakness in revenue generation.
Meanwhile, reform momentum has stalled and Moody's does not expect any significant change before the next elections due by May 2018.
It noted that 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.
Conversely, a negative rating action could result from a significant worsening in Malaysia's debt dynamics or fiscal accounts, or an inability to manage the impact of external shocks on the real economy or the financial system.