Anwar’s unity govt will lead to political stability, growth, say economists

 

Economists said the unity government led by Anwar Ibrahim would have a positive impact on the market. (Bernama pic)

KUALA LUMPUR: The unity government led by Prime Minister Anwar Ibrahim will steer the country towards better political stability, which will allow the country to progress as well as attract foreign investments, say economists.

Ahmed Razman Abdul Latiff of Putra Business School said there would be no more room for other political parties to try to topple the government as it was mandated by the Yang di-Pertuan Agong, Sultan Abdullah Sultan Ahmad Shah.

Anwar’s experience as finance minister was a plus point amid the external headwinds going into 2023, he said.

“He has experience in managing the country’s finances when he was finance minister from 1991 to 1998, when the average gross domestic product (GDP) growth for the period of 1991 to 1997 was 9.23%.

“The concept of a unity government also reflects stability and it will boost investor confidence,” he told Bernama.

Razman said Anwar was expected to ensure that people-centric initiatives and measures were implemented together with a fiscal consolidation strategy.

On the country’s economic growth, he expressed confidence that Malaysia would be able to achieve its GDP growth target of 6.5% to 7% this year.

No more uncertainties

Meanwhile, Geoffrey Williams of the Malaysia University of Science and Technology said the much-awaited announcement on the appointment of the prime minister cleared up all the uncertainties clouding the equity market as Anwar is also well-known and respected internationally.

“He has strong knowledge of economics and will focus on reforms that will be attractive to investors. It will have a good impact on investor sentiment and the ringgit has immediately strengthened on the news.

“The selloff on Bursa Malaysia in ‘sin stocks’ and banks will reverse on this news and it will be positive for the market. After this, we will look for a long-term, credible economic policy, and Anwar and his team will provide this,” said the economist.

Bursa Malaysia rallied to a near three-month high today, with the FTSE Bursa Malaysia KLCI (FBM KLCI) rising by 4.04% on bullish market sentiment.

At 5pm, the benchmark index jumped 58.38 points to finish the day at 1,501.88 compared with 1,443.50 at Wednesday’s close.

Meanwhile, the ringgit climbed 1.8% to its highest in over two months versus the US dollar.

At 6pm, the local note surged to 4.4910/5000 against the greenback from Wednesday’s close of 4.5725/5775.

Challenges and reforms

Williams said Anwar’s immediate challenge is to present a credible budget that would focus on protecting growth for next year and keeping inflation low.

He said the new prime minister also needed to begin the reform agenda focused on social and economic reforms on pensions and social protection, reducing cartels and improving competitiveness, promoting private investments and helping the small and medium-sized enterprises.

“They will make a new budget because (the former) Budget 2023 was a pre-election budget. Now we need a budget to protect growth next year and help control inflation so that we won’t need to raise interest rates further.

“In the unity government, they could benefit from taking the best ideas from the manifestos of other parties too as a way of forming confidence and consensus,” he said.

Kenanga Research expects the continuation of prevailing policy inclinations including pro-business; protectionism for local industries; business-as-usual for government-linked companies; strong fiscal support to the economy with cash handouts and fuel and food subsidies; and pump-priming.

“We continue to advocate investors to seek refuge in banks, telcos, auto makers or distributors, mid-market retailers and construction as we believe the ‘unity’ government will be supportive of domestic consumption.

“As such, we raise our end-2022 FBM KLCI target back to 1,500 points from 1,450 points,” said the research house. - FMT