KUALA LUMPUR (Aug 16): Malaysia’s overall sovereign credit profile is concluded to be rated as A3 stable — ‘relatively resilient despite external vulnerabilities’ in a recent report by the international credit rating agency, Moody’s Investors Service.

“..It would take a significant deterioration of Malaysia’s (A3 stable) external metrics from current levels for the country’s credit profile to weaken,” Moody’s said in a statement today.

The report titled “Government of Malaysia: Credit profile relatively resilient despite external vulnerabilities”, explains Malaysia’s foreign currency reserves have bounced back from a recent plunge, but remain lower than aggregate cross-border debt due over the next year.

The report also explained Malaysia’s rollover risks and currency risks was still at a manageable level.

“Total external debt, at 72.6% of GDP, is in line with the median for A-rated sovereigns. However, since mid-2016, short-term external debt by original maturity has risen to nearly half of external debt, presenting rollover risks.

“In addition, almost 60% of total external debt is denominated in foreign currency, which gives rise to some currency risk,” it said.

Despite that, Moody’s opined Malaysia’s currency flexibility, prudent monetary policy, a large domestic institutional investor base and large export proceeds and external assets will act as a buffer to cushion the impact of capital flow volatility.

“Other sources of credit risk would be a sharp growth slowdown or meaningful weakening in public finances; neither factors of which Moody's deems likely at this time,” the statement added.