PM Anwar's unity govt will lead to political stability, growth - Economists

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Economists believe Anwar Ibrahim will steer the country towards better political stability.
KUALA LUMPUR - The unity government led by the newly appointed 10th Prime Minister, Datuk Seri Anwar Ibrahim, will steer the country towards better political stability, which allows the country to progress further as well as attract foreign investments.

Putra Business School associate professor Dr Ahmed Razman Abdul Latiff said there will be no more room for other political parties to try to topple the current government as it is mandated by the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah.

Anwar’s experience as Finance Minister is a shot in the arm 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 per cent.

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

Ahmed Razman said Anwar is expected to make sure that people-centric initiatives and measures are implemented together with a fiscal consolidation strategy.

On the country’s economic growth, he expressed confidence that Malaysia will be able to achieve its Gross Domestic Product (GDP) growth target of 6.5-7.0 per cent this year.

"It will be helped by the high GDP growth achieved in the third quarter (Q3). If the value of the fourth-quarter GDP is equal to the Q3 value (of RM383.8 billion), then we will achieve the target,” he said.

Malaysia's economy grew by 14.2 per cent in Q3 this year supported by continued expansion in domestic demand, firm recovery in the labour market, robust electrical and electronics (E&E) as well as non-E&E exports, and ongoing policy support.

Following the healthy Q3 economic performance, Bank Negara Malaysia governor Tan Sri Nor Shamsiah Yunus said the full-year growth for 2022 is expected to exceed seven per cent.

No more uncertainties on the political front

Meanwhile, Dr Geoffrey Williams of the Malaysia University of Science and Technology said the much-awaited announcement would clear 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 per cent on bullish market sentiment following the clarity in the local political scene, coupled with positive external developments that fueled investors’ risk appetite.

At 5 pm, 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 per cent to its highest in over two months versus the US dollar at market close.

At 6 pm, 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 make a credible budget that is focused on protecting growth for next year and keeping inflation low.

He said the new Prime Minister also needs 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 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 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 shared.

Williams noted that the unity government is actually the most common form of government in democracies; the United Kingdom and United States are exceptions but most European countries have to form unity governments after elections.

Hence, he opined that the unity government can work in Malaysia.

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.

In the 15th General Election, Pakatan Harapan chaired by Anwar managed to win 82 parliamentary seats, while Perikatan Nasional won 73, Barisan Nasional 30, Gabungan Parti Sarawak 22, Gabungan Rakyat Sabah six, and Parti Warisan three.

One seat each went to Parti Kesejahteraan Demokratik Masyarakat and Parti Bangsa Malaysia in addition to two independent candidates. - BERNAMA