Hung Parliament: What it means to the economy

The just-concluded 15th general election (GE15) has brought Malaysia to unchartered waters with a hung parliament, wherein neither coalition crossed the indispensable line of 112 simple majorities to form the next government independently.

The conundrum is not surprising, Universiti Tun Abdul Razak economist Barjoyai Bardai said, adding that it is how democracy works today.

“The new government can be formed without a majority of winning seats, a mixed government of several political parties, and a new coalition emerges,” he told Bernama in an interview.

A total of 220 of the 222 parliamentary seats were contested as polling in the Padang Serai parliamentary constituency in Kedah has been postponed to Dec 7 following the death of the Pakatan Harapan candidate for the seat, incumbent M Karupaiya on Wednesday.

The new date for nomination of candidates is Nov 24.

At the same time, voting was suspended at 11 polling stations in Sarawak's Baram parliamentary constituency due to flooding, with voters seen standing knee-deep in floodwaters.

Citing recent developments in the United Kingdom whereby the then prime minister, Liz Truss, was changed in 45 days after appointment. It goes to prove that rotating prime minister, a swap method that allows the government to exist without the need for one majority party is possible, said Barjoyai.

Truss resigned after a series of U-turns in its mini-budget, which included cutting taxes as well as sackings, and resignations. The pound sterling tumbled as markets were spooked.

Fundamentally, Malaysia’s economy is strong, but the current scenario would somewhat still affect investors’ sentiment albeit in the short term, said Shazali Abu Mansor, deputy vice-chancellor of research and graduate studies at i-CATS University College.

Investors would probably adopt a wait-and-see attitude until a new government is formed, he said.

Which alliance? Politics is an art of possibilities

Mohd Nazari Ismail from Universiti Malaya's Business and Economics Faculty said there are many scenarios, and it really boils down to the outcome of negotiations between the parties.

GE15 saw three major coalitions, namely BN, Harapan and Perikatan Nasional (PN) versus the previous election which had only BN and Harapan.

"If one party won, the political situation will be more stable; if the results are even, two parties will work together to form a government, but we don't know who will cooperate with whom at this point in time," he said.

The initial expectation was that the market had priced in an UMNO-led BN plus Gabungan Parti Sarawak (GPS) government.

However, the outcome of GE15 was an upset for BN, having set out with confidence to retake the government in Putrajaya, suffered the worst defeat in its political history when it won only 30 seats out of the 178 it contested.

Harapan bagged 82 parliament seats and PN 73 parliament seats. It was followed by GPS with 22 seats, Gabungan Rakyat Sabah (GRS) with six seats, Warisan with three seats, and others with four seats.

The Election Commission (EC) chairperson Abdul Ghani Salleh announced that no political party has been able to obtain a simple majority after they failed to win 50 per cent out of 219 parliamentary seats in the GE15.

When this announcement was made, the result for Kota Marudu parliamentary seat was not out yet.

Meanwhile, PN chairperson Muhyiddin Yassin is willing to collaborate with any party, except Harapan, that can accept its cause and principles in forming a clean and stable government.

He also said that PN had received a letter from the Yang di-Pertuan Agong and was instructed to finalise certain matters by tomorrow afternoon.

“There’s no need for me to reveal the content of the letter. The Agong has given a list of matters that need to be finalised accordingly.

“We need to discuss certain matters and we hope to finalise it by tomorrow afternoon, InsyaAllah,” he said.

On the other hand, Harapan chairperson Anwar Ibrahim claimed to have obtained the support of enough MPs to form the new government with a simple majority.

If the GE15 has resulted in a hung Parliament, the market may correct fears over ongoing political uncertainty post-GE15, as CGS-CIMB had predicted ahead of the election.

“As the saying goes and cliché as they sound, 'politics is the art of the possible' and 'there are no permanent friends and enemies in politics'.

“We should not rule out the potential scenario of 'unthinkable' alliance,” Maybank Investment Bank’s analyst, Suhaimi Ilias, had also said prior to GE15 itself.

He said another possibility is a “minority” government due to a “hung” Parliament outcome or a stalemate among parties in forming a coalition government with a simple majority.

No guessing on policy changes and the impact of such a scenario. It will be a period of uncertainty but the discovery for everyone including the economy and the market, he noted.

Common grounds in policies, people and economy

Regardless of the outcome, fiscal consolidation will remain a priority, although the path could be different depending on which party or alliance that leads the government, said Suhaimi.

In terms of government expenditure, “people-oriented” measures will continue especially the cash handouts programme that has been in existence since the time of the pre-GE14 BN government and went through name changes to reflect the government of the day.

“What we expect - as per the cash handouts – is for other assistances to become more targeted such as subsidy restructuring to a targeted mechanism from a blanket system and rationalisation of various social safety net and welfare programmes.

“We also expect the post-GE15 government to proceed with the tabling of the Fiscal Responsibility Act that was mentioned in the Budget 2023 speech.”

He said major infrastructure projects would continue – for projects now under construction – East Coast Rail Link, Gemas-Johor Bahru (JB) Electrified Double Track, JB-Singapore Rail Transit Link, Pan-Borneo Highway and Sabah-Sarawak Link Road - and for projects in which tenders have started – Klang Valley Mass Rapid Transit Line 3.

The expectation is also for a higher share of the federal government development spending allocation to the less-developed states for basic infrastructure.

“The new federal government is expected to focus on improving the quality and delivery of essential public services, especially education, training and healthcare, as well as realising higher and quality investment flow to the less-developed states for a more inclusive, equitable and balanced socio-economic developments.”

With sustainability being the buzzword, any government to be formed after GE15 will no doubt make sustainability a key policy agenda especially in realising the United Nations Sustainable Development Goals and delivering Malaysia’s commitments to address climate change.

Key areas will include renewable energy, electric vehicles, natural disasters impact mitigation, management of natural resources, guiding and assisting society, and micro, small and medium enterprises for a just transition towards sustainability.

- Bernama

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