KUALA LUMPUR: The depreciation in the ringgit remains manageable by the Malaysian economy, says Moody’s Investors Service.
Even though it points to a weakening environment, it is manageable for banks and rated corporates.
The ringgit has depreciated by approximately 25 per cent against the US dollar in the past 12 months, notes Moody’s.
The sovereign rating agency has placed Malaysia in the A3 stable category.
“We see ringgit depreciation as a symptom of declining export revenues, capital outflows, and worsening investor sentiment toward Malaysia,” says Rahul Ghosh, a Moody’s Vice President and Senior Research Analyst.
“These are negatively impacting key credit buffers such as the current account surplus, foreign reserve coverage, and economic growth trajectory.”
The views were presented at its inaugural Inside Asean — Spotlight on Malaysia event recently, which focused on the impact of heightened market volatility on Malaysia’s credit markets.
Moody’s expects its rated corporates—which have natural hedges and better flexibility despite external funding exposure— to weather the weaker ringgit.
However lower Brent crude and palm oil prices will weigh on commodity producers’ cash generation and earnings.