Will GE15 stabilise the economy?

 

Umno president Ahmad Zahid Hamidi has rightly highlighted the importance of a clear outcome for GE15 ahead of a widely expected global economic slowdown in 2023.

Things may get worse for the Malaysian economy until a strong and stable, widely accepted new administration arrives but will a BN win deliver that stability?

The dissolution of parliament has disrupted Budget 2023, which is now abandoned. It will have to be re-tabled under a new government and if it changes, which is likely in any election outcome, there is very little time to clear it this year.

Already Tengku Zafrul Aziz has changed Budget 2023 to highlight higher civil servant pension hand-outs. This looks populist and rather desperate and will not inspire market confidence. It will also not help the rakyat or investors to understand the direction of the economic policy.

The exchange rate was stable during the budget speech but fell after the election announcement. This may be a sign that markets are unclear about the outcome.

GE15 is not a normal election and the result is not at all certain. Political coalitions are unstable. BN is divided internally and is not the force it was before. It will now fight PN and PAS, splitting the Malay vote. There is a new electorate of 5.8 million people as Undi18 and automatic voter registration come into play. We do not know how that will play out.

So this will add to short-term uncertainty and we will have to wait and see. If the politicians present exciting new ideas for structural reforms then this would help any new government to build confidence.

There are different scenarios for the economy based on the outcome of the election. A big BN win could signal business as usual with Budget 2023 revised slightly.

On the other hand, a big BN win might also cause a power struggle within the BN leadership. There are two de facto PM candidates in BN and also two finance minister candidates.

The health minister Khairy Jamaluddin does not have a seat and could be out. So the cabinet could change dramatically.

Tengku Zafrul could be replaced and the economic policy direction could change too. So even a big BN win is not certain to bring economic stability in the short-term or clarify the long-term economic strategy.

If PH wins then we might have a clearer outcome. This seems the most likely possibility because PH and their partners have 99 seats and should regain most of the seats lost in party-hopping.

They are the biggest and most united coalition. Now we need to see what their economic policy and budget will be like and it will have to be very good to make a difference to voters and markets.

If there is a hung parliament and frantic negotiations to build a coalition then we will be in GE14 territory again and markets will worry whether any coalition will survive. Then we will really struggle to see a clear economic scenario for the budget or long-term development and reform. This will be a problem and it will scare investors.

A strong, clear PH win without relying on smaller parties would appear to be more stable on this analysis not least because they have a clear, united prime minister and finance minister team. Until we see their policies we cannot really judge the economic impact. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.