KUALA LUMPUR (March 17): Malaysia’s implementation of major policy reforms has mitigated the negative impact of lower oil prices on the government's fiscal position, according to Moody’s Invetors Service.

In a statement today, Moody’s nevertheless said that  external pressures—including increased capital flow volatility and consequent exchange rate depreciation--have led to a deterioration in Malaysia's growth and external metrics that have informed the earlier decision to revise the rating outlook to stable from positive.

Moody’s said this in a credit analysis on Malaysia, which examined the sovereign in four categories: economic strength, which is assessed as "very high (-)"; institutional strength "high (+)"; fiscal strength "high (-)"; and susceptibility to event risk "moderate
(-)".

Moody’s said the report constitutes an annual update to investors and is not a rating action.

It also follows Moody's decision on 11 January to affirm Malaysia's A3 government bond rating and revise the rating outlook.

“While Moody's notes the government's proactive fiscal management in demonstrating the commitment to narrower fiscal deficits, the public debt burden and debt affordability has not seen material improvement.

“At the same time, contingent risks to the government's balance sheet from the non-financial public sector or the banking system are manageable,” it said.