Bmi Says Malaysia Faces Higher Short Term Political Risks

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“In light of the weaker-than-expected performance by Pakatan Harapan, we believe that the unity government will be inclined to roll out race-based policies that are in favour of the Bumiputeras to shore up support among this core group. However, there are implications involved,”
(NST) – BMI, a unit under Fitch Solution, has lowered Malaysia’s short-term political risks index (STPRI) score denoting heightened political risks on account of the challenges the unity government is likely to face amid a slowing economic backdrop, and its ability to push through with reforms while holding the multi-party coalition together.
BMI has revised Malaysia’s STPRI score to 71.7 (out of 100), from 72.9 previously. A higher score indicates lower risk.The policymaking component has been lowered from 58.3 to 53.3 on increased policymaking challenges with growing Perikatan Nasional (PN) influence.
“In light of the weaker-than-expected performance by Pakatan Harapan, we believe that the unity government will be inclined to roll out race-based policies that are in favour of the Bumiputeras to shore up support among this core group. However, there are implications involved,” BMI said in its note.
PN won over 95 per cent of seats in the three states that it currently controls, and made gains in the remaining three states held by PH.
BMI said rolling out race-based policies will cause the coalition government to backtrack on its commitment of implementing needs-based policies as opposed to race-based policies. Second, while such policies could prove popular for Barisan Nasional’s support base, it could stoke tensions with other members of the coalition government including the Gabungan Parti Sarawak and Gabungan Rakyat Sabah, leading to a slowdown in reforms and/or cause policy gridlock.
“By extension, we now anticipate greater risks to Malaysia’s investment outlook and our real gross domestic product (GDP) growth forecast. We currently expect Malaysia’s real GDP growth to come in at 4.2 per cent in 2023 (down from 8.7 per cent in 2022), and timely indicators have already suggested pockets of weakness in Malaysia’s investment landscape,” BMI said.Malaysia’s Manufacturing Purchasing Managers’ Index (PMI) has fallen to 47.8 as of July 2023, marking the twelfth consecutive month it has stayed below the 50.0 mark, which separates contraction from expansion.

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