Amid tariff uncertainties, RAM-rated credits remain resilient

Published on 28 Apr 2025.

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The escalating US-China trade war has created significant uncertainties for the global and domestic economy. While the direct impact on Malaysia’s economy is manageable (save for E&E sector), the indirect or second-round impact will be more pervasive given the heightened risk of slower global growth. RAM Rating Services Berhad (RAM) has revised Malaysia’s growth forecast to between 3.5% and 4.5% for 2025 from 4.0%-5.0%. 

Against this backdrop, the credit outlook for RAM’s rated portfolio is expected to stay stable as more than 80% of issuers are AAA and AA-rated, predominantly exposed to the domestic market and have strong balance sheet and debt headroom. Corporates exposed to export and highly tariffed sectors feature in less than 5% of RAM’s portfolio. A significant slowdown in global trade and growth will invariably impinge on business investments and capital spend strategies, threats that RAM will monitor closely across its portfolio in coming months.    

RAM recently shared its macro and credit outlook on various sectors in its annual Credit Summit, held on 22 April 2025, which drew about 170 participants. 

RAM’s Head of Economic Research, Woon Khai Jhek, expects US-China retaliatory tariffs to have a spillover impact on Malaysia's export performance and growth as the two superpowers account for 13% of Malaysia’s total value-added. However, domestic consumption and investment are anticipated to anchor demand, backed by wage adjustments and sustained public and private-led infrastructure projects. Trade substitution and realisation of greater intra-ASEAN initiatives may also support the future outlook.  

Current uncertainties would also affect the banking sector, a leading indicator of economic performance. In tandem with the macro forecast revision, RAM has downgraded the Malaysian banking sector’s loan growth for 2025 to 4.0%-4.5% from 5.5% earlier, reflecting weaker sentiments and increased cautionary spending. The rating agency opines asset quality will remain manageable, despite a possible slight uptick in gross impaired loan and credit cost ratios of 1.5% and 25 bps, respectively (previously, 1.4% and 20 bps). RAM’s Vice President for the banking sector, Amy Lo, believes some banks may take proactive measures to help contain loan impairments. The Malaysian banking sector, which constitutes about 58% of RAM-rated credits (by programme value) remains stable overall, coming from a position of strength as banks continue to maintain prudent underwriting practices. 

Malaysia’s power sector, which makes up a significant share of RAM’s rated portfolio, remains the bright spot, with the sector on positive outlook as incumbents are fairly insulated against external headwinds. Chong Van Nee, RAM’s Senior Vice President for the Infrastructure and Utilities sector, highlighted that despite the indirect impact of tariff tantrums, Malaysia’s continued renewable energy (RE) programme expansion, particularly solar, and grid modernisation are unlikely to slow, given that energy transition is a key government priority. The global oversupply of solar panels will also benefit local RE developers and contractors.  

The port sector faces significant risks from the trade war and tariffs, which will impact shipping volumes and fees. That said, RAM-rated ports have sufficient rating headroom to withstand immediate credit pressure during this period, observed Davinder Kaur Gill, Senior Vice President for Infrastructure and Utilities. She added that reconfiguring market access through diversified trade partners, adapting supply chains, and enhancing Malaysia’s competitiveness to meet rising intra-Asian trade could pare local ports’ over-reliance on US and China trade. 

For the corporate portfolio, RAM has put on negative the outlook for the shipping, oil & gas, and industrial property sectors. Nevertheless, the credit profile of most rated corporate issuers remains stable despite more challenging industry conditions, says Thong Mun Wai, RAM’s Senior Vice President of Corporate Ratings. Issuers in the affected sectors have strong financial buffers to withstand current uncertainties. Data centres, which have spurred demand for industrial properties in recent years, could see the pipeline slowing in the future if the tariff fog and tit-for-tat access to technology prolong. This is however not expected to impact data centres that are under construction in various parts of Malaysia, providing a boost to banking and potentially capital market financing. 

The RAM Credit Summit also featured panel discussions, namely dissecting “Key Shifts and Trends Shaping the Economy in 2025” with Firdaos Rosli, Chief Economist of AmBank Group, and Adelene Teo, Economic Adviser to the British High Commission, and the “Path to Innovation, Growth and Regulation for Consumer Credit” with Alain Yee, Executive Director and Chief Executive of ShopeePay, and Azhar Awang Kechil, Chief Retail Banking Officer of Al Rahji Bank Malaysia. Further, RAM’s ESG specialists Gladys Chua, CEO of RAM Sustainability, and Chan Yin Huei, Vice President of Ratings, shared developments on the ESG and sustainability front. These panels were engaging and respectively addressed issues on the tariff war and its impact on the global and domestic front, as well as new regulations affecting digital consumer lending and sustainability commitments.

RAM’s Credit Seminar is the rating agency’s annual signature event for investors, clients and market participants, offering latest insights into the economic and credit trends shaping Malaysia’s financial landscape.

 

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my

 

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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

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