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Moody’s downgrades Malaysia’s credit outlook

by ChemOrbis Editorial Team -
  • 11/01/2016 (11:31)
According to media reports, international rating agency Moody’s Investors Service downgraded Malaysia’s credit-rating outlook to stable from positive, citing large capital outflows, a lower current account surplus, a sharp depreciation in local currency and falling reserves as the main reasons behind their decision. Meanwhile, two other major credit agencies- Standard & Poor’s and Fitch Ratings- also assigned Malaysia an A3 credit rating, the fourth-lowest investment grade.

Moody’s reported that the government’s efforts to alleviate the adverse effects of the external environment on the economy, including rationalizing fuel subsidies and implementation of a goods and services tax will remain limited in the upcoming period.

Following Moody’s decision to cut the country’s credit outlook, the Malaysian ringgit extended losses. The currency weakened 0.5% to 4.4070 against the US dollar, according to Bloomberg. The currency has been under pressure from multi-year low oil prices and the delicate Chinese economy. Muted Chinese inflation data also put further downward pressure on the currency. In 2015, the ringgit slumped about 19% to a 17-year low.

Meanwhile, according to data released by the government, Malaysia’s industrial production in November declined to its weakest pace in 16 months due to weaker global demand and lower mining production. The country’s factory output increased 1.8% on the year, posting its slowest pace since July 2014. The November figure also fell below economists’ expectations, which called for a gain of 4% in a survey by Reuters.
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