Malaysia’s politicking harmful to Covid-19 outbreak response, say analysts

PETALING JAYA: The dissolution of the Cabinet following the resignation of Tun Dr Mahathir Mohamad as prime minister and Parti Pribumi Bersatu Malaysia (PPBM) chairman yesterday will hinder the country’s efforts to respond to the Covid-19 outbreak.

“Our core view is for the formation of a new government to proceed, but in either case, the country is left without much needed leadership amid a slowing economy that must deal with the global outbreak of Covid-19,” it said in a report today.

It lowered Malaysia’s short term political risk score to 69.8 (out of 100) from 72.5 previously, to reflect the risks to social stability, policymaking and policy continuity.

Fitch Solutions outlined two possible scenarios which are: either Pakatan Harapan dissolves and the new Malay-Muslim dominant coalition Perikatan Nasional forms a government with Mahathir as prime minister, or there no new govt, Pakatan Harapan dissolves and fresh elections are called for.

“In either case, we expect the economy to be weighed down further in the short term due to paralysis in government, posing downside risks to our already bearish revision of real gross domestic product (GDP) growth in 2020 to 3.7% from 4.5% previously.

“Uncertainty in policymaking also bodes ill for Malaysia’s ability to react to any new developments in the fast-moving Covid-19 pandemic, which has already infected at least 22 people in Malaysia as of Feb 24, raising the risks of a large and sustained outbreak in the country,” it said.

In a separate note, Moody’s Investors Services Sovereign Risk Group AVP-analyst Christian Fang said departures from the Pakatan Harapan coalition and Mahathir’s resignation, usher in a period of uncertainty for the country, because it is unclear as to how or when a new government will be formed.

“Such uncertainty weighs on private investment, and if prolonged, will compound growth challenges and add downside risks to the country’s credit profile, particularly if the new government changes the policy emphasis away from fiscal consolidation and institutional reforms.

“Malaysia’s 2020 real GDP growth should slow to 4.2% from a 10-year low of 4.3% in 2019, with downside risks from ongoing global trade tensions and the coronavirus outbreak,” he said.

In regard to the stimulus package that was due to be announced on Feb 27, Fitch Solutions noted that in light of the political upheaval, meaningful fiscal measures to support the economy will be significantly delayed, even if they are announced as planned.

“Malaysia’s situation in this regard is in stark contrast from most other Asian economies which have moved relatively quickly to announce and implement additional spending, such as China, Taiwan, Hong Kong, Singapore and Thailand.”

Fitch Solutions added that it sees increasing downside risks to Malaysia’s long-term growth prospects.

Given that the country’s ability to implement sensitive but much-needed reforms to the country’s affirmative action policies, needed to correct inefficiencies and reverse a heavy outflow of talented individuals from ethnic minorities to especially neighbouring Singapore, will be heavily curtailed, the research unit said it will be revisiting our long-term outlook for Malaysia’s economy over the coming weeks.

source https://www.thesundaily.my/business/malaysia-s-politicking-harmful-to-covid-19-outbreak-response-say-analysts-DB2047757