Impact of political uncertainties on Malaysia’s economy | The Malaysian Insight

ALMOST every event can trigger a change in economic performance. Recently, the resignation of Dr Mahathir Mohamad as prime minister, followed by his appointment as an interim prime minister, sparked change in Malaysia’s political and economic landscape.

Technically, a decline in the FTSE Bursa Malaysia KLCI will affect the companies in terms of their stock offering, specifically the companies’ liquidity and ability to meet their obligations, leading to a slowing down in their expansion. The FTSE Bursa KLCI increment is primarily demand sided from the investors that sees an opportunity to buy stock at low prices. It depends on Bank Negara Malaysia to curb this shock, or FTSE Bursa Malaysia KLCI’s decline will continue and disrupt companies’ liquidity and ability to meet their obligations.

Therefore, it is crucial to regain foreign investors’ trust, and the magnitude of the impact on the economy depends on how long political uncertainties and the Covid-2019 outbreak last. The faster, the better for Malaysia. Theoretically, a depreciating ringgit will boost Malaysia’s exports as our products will be seen to be cheaper. However, the historical data debunks that notion. For example, the ringgit depreciated to 4.2920 against the US dollar on December 31, 2015, but Malaysia’s export in 2015 still decreased to about 16.02% compared to a year before.

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