PETALING JAYA: The hung Parliament will exacerbate uncertainty in the country and take a toll on the economy, says the head of a think tank.
“It will create nervousness in the market. We can expect turbulence where the ringgit and the stock market is concerned,” said Carmelo Ferlito of the Center for Market Education.
Ferlito said as no party had the majority, the next government will likely comprise political parties that wanted to see each other’s demise.
“The order of the day will be staying in power and populist policies will likely be prioritised ahead of policies the country needs,” he told FMT.
“All economists agree that 2023 will be a difficult year and this means the government must be prepared to make difficult decisions in the interest of the economy even if they are unpopular.”
But Ferlito said he does not see this happening.
Instead, like in the past two years, he believes the country will see more populist decisions, a lack of consistency in policies, and U-turns.
Yeah Kim Leng of the Sunway University business school also said the hung Parliament was “not ideal”, and agreed that populist policies were likely to continue.
“Aside from policy uncertainty, there are also concerns that public spending will be put on hold until we have a new government in place.
“Investors want clarity, so expect major decisions on investing in Malaysia to be postponed until the dust is settled,” he told FMT.
Yeoh also pointed out that with Malaysia having experienced a peaceful transition of power before, there would not be any political unrest in the country.
“All coalitions are also generally market-friendly,” he said.
“The next government’s main challenge is reining in spending and increasing revenues. Without fiscal reforms, we will see debt increasing.”
In June, it was reported that Malaysia’s debt had hit the RM1.3 trillion mark.