Moody's just downgraded its outlook for Malaysia

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Ratings agency Moody’s just revised Malaysia’s sovereign rating outlook.

It has changed the rating outlook for the nation from positive to stable.

Despite the downgrade, Malaysia’s sovereign rating was affirmed by the group at A3.

According to Moody’s, the drivers of the revision were a deterioration in Malaysia’s growth and external credit metrics due to external pressures over the past year, macro-financial risks posed by system-wide leverage, which remains high, along with the expectation that progress on fiscal consolidation will see only limited improvement over the outlook horizon.

“The stable outlook suggests that the upside and downside risks are balanced, said Moody’s following the decision.

“Nonetheless, upward pressure on the sovereign’s rating could arise from a greater convergence in debt metrics with similarly-rated peers, accompanied by improvements in debt affordability and fiscal deficit reduction.”

“Conversely, a significant worsening in Malaysia’s debt dynamics—possibly arising from an inability to manage the impact of lower crude oil and agricultural commodity prices—on the fiscal accounts or the crystallization of large contingent liabilities, could exert downward pressure on the rating.”

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