Moody’s Lifts Malaysia’s outlook to A3 stable on AI-related Growth

KUALA LUMPUR, June 19 (Bernama) -- Moody’s Ratings has modestly raised its forecasts for Malaysia to A3 with a stable outlook, due to its exports of artificial intelligence (AI)-related goods.

The rating agency said the accelerating adoption of AI and ongoing supply-chain reconfiguration will create opportunities for stronger productivity growth in Asia-Pacific over the long term.

“As AI adoption grows, investment in data centres is rising rapidly in Asia-Pacific, particularly in Korea, Malaysia, Thailand and India, and data centres are being built to meet strong domestic demand and make up for capacity constraints in regional hubs such as Singapore,” it added.

Moody’s further said that the ongoing reconfiguration of global supply chains resulting from persistent geopolitical tensions and tariff uncertainty is also creating opportunities in the region, particularly in export-focused Southeast Asian economies.

“Foreign investment into Vietnam, Malaysia and Thailand is strong, with international firms relocating some of their production to these countries to diversify away from China.

“However, the extent to which these inflows translate into sustained productivity gains and higher value-added production will depend on improvements in infrastructure, power supply and workforce skills,” it said.

On government debts, Moody’s said that Malaysia’s debt trajectory will remain broadly stable, reflecting energy-related revenue, although higher subsidies and borrowing costs will erode these gains.

Compared with other Southeast Asian countries, Moody’s said its nominal growth and government fiscal policy choices are expected to help contain debt levels in Indonesia and the Philippines, although risks to growth and the fiscal outlook are increasing.

As for Thailand, the country’s debt will continue to increase, reflecting a weaker growth outlook and recent fiscal stimulus equivalent to about two per cent of gross domestic product. 

-- BERNAMA