Slowing Malaysian economy could be a challenge for new regime
MALAYSIA - or "new Malaysia"- marked its first 100 days on Aug 17 under the Pakatan Harapan government led by Prime Minister Mahathir Mohamad since it wrested the ruling power from the Barisan Nasional coalition at the polls in May.
The reviews of the new regime's initial showing over this milestone-period have been pouring in and all in all, in terms of the "tangibles" there have been more misses than hits as certain measures are still work in progress. One election pledge that has been fulfilled is the scrapping of the unpopular Goods and Services Tax (GST).
The intangible positive outcomes too deserve mention. The once-bruised public faith and trust in the country's key public institutions is on the mend while the laundering of multi-billion dollars from state-backed 1Malaysia Development Berhad (1MDB) is being dealt with head-on and no longer being swept under the rug.
According to independent pollster Merdeka Centre's recent post-election 100-day assessments, Dr Mahathir, 93, has secured an approval rating of 71 per cent - a major swing from the 38 per cent approval rating of his predecessor Najib Razak just ahead of the May polls. At one point in 2015 amid the full-blown crisis involving 1MDB, Mr Najib's rating had plummeted to 17 per cent. In terms of economic management, the survey discovered that the new regime enjoys higher and "commendable" public confidence with approval ratings at 66 per cent. This is crucial considering the macro headwinds blowing in the region on the back of trade wars, geopoliticals risks and tightening monetary policy.
Initial post-election jitters over policy uncertainty from a change of regime have visibly dissipated, with net foreign outflows for July having moderated while the Malaysian equities' key benchmark has recouped most of its year-to-date losses. Last week too, Fitch Rating affirmed Malaysia's long-term foreign currency issuer default rating at minus A with a stable outlook.
There are trouble spots. Malaysia's latest second quarter GDP took an unexpected negative turn with growth coming in at 4.5 per cent year-on-year over the period, from 5.4 per cent in the previous quarter, and way below consensus expectations of 5.2 per cent. The sub-par Q2 growth was attributed to weak net exports, and marked the slowest pace of April-June quarter growth in one and a half years. The slowdown has heightened expectations that the overall growth outlook for the Malaysian economy in 2018 may risk being readjusted further from a 5.5-6 per cent projection. Indeed, recent data trends among emerging South-east Asian economies indicate that growth may be slowing, which suggests that Malaysia's latest off-target growth might not be just a one-off miss.
To rein in debt, the government has shelved huge infrastructure projects - the latest including the Chinese-funded US$20 billion East Coast Rail Link and a gas pipeline. The cutback in investment activities could further dampen the domestic growth momentum.
With the country's tight fiscal stance not providing the government much room to increase spending, it is not clear to what extent consumer expenditure - buoyed by GST removal and low inflation - can do the heavy lifting for the economy.
With the first 100 days done and dusted, macro-risks are mounting and could challenge pocketbook issues - a perennial top concern among most Malaysians. The so-called "honeymoon" period is over. The next report card on the new regime will be on how it cushions the economy as it braces for a slowdown amidst an increasingly challenging external environment.
For Dr Mahathir's Pakatan Harapan government, the hard work to take Malaysia forward has really only just begun.
