KUALA LUMPUR (Sept 19): Moody’s Investors Service said it has revised down Malaysia's loan growth target for the year to reflect impending changes in government policy and a current subdued market outlook.

Political developments are dampening loan growth prospects for Malaysian banks, with loan growth to be weaker than expected, it said.

Moody's has projected for loan growth to hover between 5% and 6% this year, after recently setting the rate between 6% and 7%. 

"We were previously more optimistic that there would be faster recovery but headed towards the end of the year, we want to be more realistic, given sentiment continues to be dampened," Moody’s vice-president and senior analyst Simon Chen explained on the revised rate. 

Regardless of this modest loan growth rate, Chen said the banking sector outlook remains stable, as operating conditions continue to remain robust.

"We are refining our assessment of the growth conditions and we find that the private sector is still taking the wait-and-see approach.

"However on a whole, looking at capital and liquidity buffers that banks maintain, they continue to be resilient against any volatility over the next 12- to 18 months," he said at a Moody's media briefing earlier. 

A key milestone the private sector will be looking at will be the upcoming Budget 2019 that will help alleviate some policy uncertainties, he added.