Penang Chief Minister Lim Guan Eng said Moody’s Investors Service has "downgraded” and not “changed the outlook to stable” Malaysia’s bond ratings at A3.

He criticised newspapers, targeting, The News Straits Times , for saying that Moody's “changed the outlook to stable from positive”.

“It was clearly a downgrade and lowering of ratings,” he told a press conference at his office in Komtar, George Town, today.

Lim was referring to Moody’s statement in the NST that its decision to stabilise the government bond rating at A3 rather than A2 balanced the impact of changes in the external environment on Malaysia’s growth, external balance, and reserves since the assignment of a positive outlook in November 2013, together with the risk posed by domestic imbalances against the positive impact of the fiscal consolidation since then.

The NST quoted Moody's as saying today that “the assignment of a positive outlook (earlier) reflected Moody’s view that continued improvements in the government’s balance sheet could further enhance Malaysia’s fundamentals”.

“The period since then has seen further fiscal consolidation, including through the implementation of the GST and the rationalisation of fuel subsidies,” Moody's further stated.

Downgrade in bond ratings, Lim said, affects all Malaysians as interest rate and cost (of living) increase would naturally follow.

“This is an indictment of the performance of Malaysia’s economy despite the prime minister saying that the Goods and Services Tax (GST) has saved the country.

“Obviously foreign investors do not agree. Despite having GST, the ratings have been downgraded. The principal reasons are the high deficits and high depreciation of the ringgit due to allegations of financial scandals involving the government.

“It is indeed a tight slap to BN’s way of handling the country’s economy; Malaysians are suffering. Last year was bad, this year would be even worse,” he said.

Lim said the full impact of the worsening economy will be felt this year and the country is in dire need of reforms in its financial systems from the present condition to being a “clean and not a crony” administration.

He added that the only hope for the country is for Putrajaya to resolve the allegations of financial scandals.

Asked if the ratings would affect investments in Penang, Lim said: "Hopefully not."