This article first appeared in The Edge Financial Daily on January 11, 2018

KUALA LUMPUR: A busy electoral schedule may slow reform momentum in Malaysia which is set to hold its general election this year, said Moody’s Investors Service.

Other countries set to hold parliamentary elections are Cambodia, Fiji, Thailand and Pakistan, the rating agency said in its Asia-Pacific (Apac) sovereign outlook for 2018 report yesterday.

“A slower pace of cross-border economic integration will constrain improvements in growth potential compared with the past two decades. Medium-term challenges also relate to the ongoing rebalancing in China, which will likely continue to constrain its imports, generally slowing or negative demographic trends in the region, and potential middle-income traps,” Moody’s added.

The report also highlighted that most Apac economies are highly leveraged, either in the government, corporate or household sectors, a result of several years of relatively slow revenue and income growth and low interest rates.

Nonetheless, Moody’s said a favourable growth environment underpins its stable outlook for sovereign creditworthiness in Apac over the next 12 to 18 months, although high leverage remains a key credit constraint.

It expects Apac emerging markets to grow by 6.5% in 2018, frontier economies by 5.9% and advanced economies by 1.8%.

The credit rating agency rates Malaysia as A3 stable.

“Robust economic strength in the region and high levels of trade openness leave the region’s sovereigns well-positioned to benefit from stronger global gross domestic product growth,” said Moody’s assistant vice-president and analyst Anushka Shah.