Moody's: Malaysia needs to be rated at a higher level

TWR | UPDATED AUGUST 31, 2015 12:07 AM ET:- Ratings agency Moody's Investors Service said last week Malaysia "needs" to be rated at a higher level, after local media questioned why the firm had maintained an outlook on Malaysia perceived as rosy, despite other prominent agencies indicating a more guarded view on the country's sovereign credit.

“When we put a positive outlook(on Malaysia) in November 2013, part of it was driven by a methodological change.
“This can get very technical(..).
“And what we saw .. (..) From a methodological perspective it does look like that Malaysia needs to be rated at a higher level,” said Christian de Guzman, Moody's VP and Senior Analyst for Sovereign Risk, speaking to members of the press in Kuala Lumpur.

“However, cognizant of the risks present then, and perhaps the exacerbation of those risks since then, we haven't upgraded to that higher level, and we have basically taken a wait and see approach,” said de Guzman.

“And I think we have been very consistent about this.”
“It's not like we are ignoring the risks,” de Guzman said.

Pressed whether it might revise its positive outlook on Malaysia, de Guzman gave no straight answers.

“Once again, going back to the definition when we assign a non-stable outlook that denotes a 1 in 3 chance we would move in that direction in 12 to 18 months
“So you know, a 33% chance,” he said.

Moody's had reaffirmed Malaysia's sovereign rating earlier this year due to the government's fiscal consolidation plans, including the implementation of the GST and the elimination of fuel subsidies.

Since then, external conditions have changed and “clouds” are now forming on Malaysia's outlook, the agency said.

Malaysia may need to revise its budget to accommodate lower revenue from the oil and gas sector, where royalties have traditionally been the single largest contributor to operating income, Moody's said.

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By The Week Editors