Moody's sees key risk to credit rating from US levies
KUALA LUMPUR: Tariff shocks pose a major threat to Malaysia's sovereign credit rating, given the potential disruption to economic growth and fiscal consolidation, according to Moody's Ratings.
The ratings firm sees downside risks to its initial projection of 5% growth for Malaysia this year due to exposure to global trade tensions.
There's also a possibility that the government increases spending to counter headwinds from US-imposed levies, said Christian De Guzman, senior vice-president at Moody's.
'If the global economic outlook were to turn very significantly and the government would perhaps take measures to offset some of that weakening in the global economy, they could perhaps delay or postpone the petrol subsidy re-targeting,' said De Guzman, referring to the government's plans to end blanket subsidies for its most popular fuel by mid-year.
'The risks to fiscal consolidation are there,' he said in an interview on Monday.
Malaysia has since 2004 enjoyed an A3 rating at Moody's – the highest among peers in developing South-East Asia.
While its credit score has withstood the fallout from the 2008 global financial crisis and the Covid pandemic, the double blow from US tariffs clouds the country's prospects.
Moody's changed its outlook for Thailand to 'negative' just last week, citing potential impact from higher levies. — Bloomberg
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