Pakatan Harapan’s victory in the 14th General Election (GE14) that secured 122 of the 222 seats in Parliament marks a new yet unknown stage in Malaysia’s history, reported the Borneo Post.
According to major ratings agency Moody’s, this represents uncharted territory as this is the first time that the seat of power was taken away from the Barisan Nasional party since the country’s independence in 1957.
Moreover, little is known about Pakatan Harapan’s economic policies and its electoral promises lack details to permit a more thorough evaluation of their possible effect on Malaysia’s economy, particularly the government’s budget, said Anushka Shah, Vice President and senior analyst of sovereign risk group at Moody’s.
“Some campaign promises, if implemented without any other adjustments, would be credit negative for Malaysia’s sovereign.”
“These include a proposed abolishment of the Goods and Service Tax or GST, which, without offsetting measures, would increase Malaysia’s reliance on oil-related revenue and in the near term at least, narrow the government’s revenue base,” she noted.
Another pledge – the re-imposition of fuel subsidies – is expected to help reduce fuel prices but will negatively impact the government’s fiscal position.
Nevertheless, Affin Hwang Asset Management Director of equities strategy and advisory Gan Eng Peng expects market volatility to be brief as major political changes abroad had only resulted to a bearish market for the short term.
For instance, the Thai military coup in 2014 drove out foreign investors, but the market made full recovery within six days thanks to strong domestic liquidity.
“The correction from Brexit only lasted three trading days. Similarly, the impact from Donald Trump winning the US presidency lasted just three hours. The unfavourable referendum for Italian PM Matteo Renzi only had a three-minute negative effect.”
“Fundamentally, the economy is healthy. The key policies proposed by the opposition – the removal of GST, targeted fuel subsidies – will push up the deficit, which is a concern for the bond market as 40 to 50 percent of the market is foreign funded. The Ringgit might take a hit because of that. But looking a bit further out, it is easy to see what the script could be – Malaysia will be touted as a reform play after a reset on 60 years of policies and on the back of a healthy economy,” he added.
Image sourced from Borneo Post
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