KUALA LUMPUR — March 21, 2018: Malaysia’s debt profile, mainly funded by the ringgit, acts as a mitigating factor in the event of currency or interest rate shocks, according to Moody’s Investors Service.
Its Sovereign Risk Group assistant vice-president and analyst, Anushka Shah, said the debt profile has been factored into Malaysia’s A3 sovereign rating.
“The rating is underpinned by strong growth, large and diverse economic structure and ample natural resources. Malaysia is also one of the fastest-growing A-rated sovereigns,” she said at the “Moody’s Media Roundtable: Inside Asean – Spotlight on Malaysia” today.
However, there are concerns that Malaysia’s government debt level to gross domestic product, which stands at about 51 per cent, is higher than the 41 per cent median of other A-rated sovereigns.
Other concerns highlighted by Shah include the declining growth rate of the working-age population and downside global risks, such as trade protectionism.
However Malaysia’s large buffer of foreign-exchange reserves can also mitigate external vulnerabilities.
“The government is maintaining its fiscal deficit reduction stance and committed to a reform policy agenda,” she said.
On the impact of 1MDB on the country’s rating, she said the current probability of debt crystallisation from 1MDB was low and it was not viewed as a risk to Malaysia’s fiscal position.
While speaking on Petroleum Sarawak Berhad’s commitment to start oil and gas exploration this year, Moody’s Investors Service vice-president and senior credit officer for corporate finance, Vikas Halan, said it was too early to quantify the impact.
“We do not how this will pan out but we see that Petronas won’t be much impacted. It is too early to say but our base case is no change in legal status of Petronas as the exclusive explorer and owner of the (oil) resources,” he said.
“For us, it is wait-and-see (the impact). Moving forward, all exploration will come under this company but nothing that Petronas is producing will go away,” said Halan, adding that it would be better to have an open industry. — Bernama