* Says dwindling sales hurting earnings
* Rating cut to Baa3 from Baa1
* Sony also cut to the same level earlier this month
TOKYO, Nov 20 (Reuters) - Moody's Investor Service cut Panasonic Corp's long term debt rating by two notches to its lowest investment grade on Tuesday, saying dwindling sales of its consumer electronic devices were pressuring earnings.
The downgrade to Baa3 from Baa1 follows Panasonic's forecast of an annual loss of close to $10 billion as it writes off billions in deferred tax assets and goodwill, and comes after a cut in Sony Corp's rating to the same level this month, also due to shrinking demand for its consumer electronics.
Thomson Reuters' Starmine structural model, which evaluates market views of credit risk, debt levels and changes in asset values gives Panasonic an implied rating of BB-, three ranks lower than Moody's latest assessment. The implied rating for Sony is B+.
"Challenging market conditions will continue to hinder the timely recovery of Panasonic's financial profile," Moody's said in a report.
In addition to the write-offs, a boycott of Japanese products by some Chinese consumers over a territorial dispute in the East China Sea was adding to uncertainty, it said.
Panasonic may need to undertake additional restructuring measures in some of its more difficult business segments to restore its earnings in the coming 12 to 18 months, which would further pressure its balance sheet, it added.
In October the maker of Viera TVs won $7.6 billion of loan commitments from banks including Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, a financing backstop its says will help it avoid having to seek capital in credit markets.
Prior to the downgrade, Panasonic's shares fell 3.8 percent in Tokyo, compared with a 0.1 percent fall in the benchmark Nikkei 225. (Reporting by Tim Kelly; Editing by Edwina Gibbs)