KUALA LUMPUR, May 22 (Xinhua) -- Moody's Investors Service said Wednesday that the outlook for the Malaysian banking system remains stable, as strong loss-absorbing buffers should mitigate a potential rise in credit costs and moderating profitability over the next 12 to 18 months.
"The banks are well positioned to manage the challenges associated with Malaysia's weakening economy and the vulnerable oil and gas, real estate and construction sectors, supported in particular by strong loan-loss reserves and solid capital ratios," Moody's vice president and senior credit officer Alka Anbarasu said in a statement.
Although facing a slowdown in trade, private investment and government spending will result in a moderation in gross domestic product growth to 4.4 percent in 2019 and 4.3 percent in 2020, according to the statement.
The rating agency believed domestic private demand will remain supported by stable employment conditions and wage growth.
While asset risk will rise, overall loan performance should remain stable, with the system's strong loan-loss buffers sufficient to absorb a potential rise in delinquencies, it added.