GEORGE TOWN, Feb 25 — The current political turmoil in Putrajaya could push Malaysia’s economy further into a slowdown, but only if instability is prolonged, an economist said following the abrupt resignation of Tun Dr Mahathir Mohamad as prime minister yesterday.

The uncertainty has already taken an immediate toll on the Bursa Malaysia, with The Edge Malaysia estimating last night that over RM43 billion in value has been lost as investors withdrew from the market.

Seasoned economist Tan Sri Ramon Navaratnam said the ongoing political tussle within Pakatan Harapan (PH), its splinter parties and the Opposition will certainly shock the country’s economy as is evidenced by the drop in the stock market when it opened yesterday morning

“Uncertainty and instability are one of the worse obstacles to economic growth for any country and there are already signs of a slowdown due to the world economic situation and novel coronavirus (Covid-19),” he told Malay Mail when contacted for comment on the effects of the political turmoil.

Ramon said Malaysia is in danger of going into recession unless the government comes up with satisfactory solutions to spur the economy.

Dr Mahathir was scheduled to announce a stimulus package this week to spur Malaysia’s economy, especially its tourism industry, which has been severely crippled due to travel restrictions placed on citizens from China after the global spread of Covid-19. 

Bank Negara Malaysia had also cut Malaysia’s growth forecast for 2020 earlier this month, predicting the GDP rate will grow at a slower rate of between 4.3 and 4.8 per cent now compared to the initial 4.7 per cent last year.

Ramon pointed out that the general populace is more concerned about their basic needs such as food and lodging and warned that the power play will not bode well should snap polls be called. 

“Why these politicians have nothing to do? The people are already frustrated by the state of the economy and now this, they will be disgusted and feel let down by the government.

“They are better off evaluating their own weaknesses and building up their strengths to build up the country than this. The people will feel betrayed by this,” added Ramon, who is director of the Asian Strategy and Leadership Institute and chairman of the Centre for Public Policy Studies.

Yesterday, international news agency Reuters had also quoted a financial analysts saying Malaysia will now have a hard time convincing foreign investors, especially when compared to its neighbours’ relative political stability and economic growth.

“It becomes quite hard for Malaysia to bring foreign investors back,” Jolynn Kek, the head of equity at BOS Wealth Management Malaysia, was quoted saying.

However, political analyst Oh Ei Sun assured Malaysians that the negative impact of the political crisis will only be on a short-term basis.

“If the change in government happens, there will be the initial shock, the stock market may drop a little bit but we will see a rebound because it is back to the ‘good old days’,” he said.

The senior fellow at the Singapore Institute of International Affairs believed that in the long term and if there were to a change in government as speculated, it could spell a better investment environment for businessmen and investors.

“Of course, businessmen and investors do not prefer political instability, we don’t even know who will be the prime minister tonight. However, assuming they formed a new coalition with Umno, I don’t think a lot of investors and businesses will have problems with this,” he said.

He said businesses and investors placed emphasis on profits and revenue so they would look at the situation realistically.

“It will be back to the good old days, they can go to their favourite minister, pay him under the table, get projects and perversely, that is good for business sentiments,” he said.

He said businessmen generally do not have problems with the corruption and collusion going on under Umno.

“Investors are not saints, they just want to make money one way or the other,” he said.

The FBM KLCI closed at 1,490.06 Monday, which was 2.69 per cent lower, the lowest point since 2011.

The ringgit had also weakened yesterday against the Singapore dollar and US dollar as it traded at RM3.0128 for the former and at RM4.2215 for the latter at 5pm on Monday.

Meanwhile, Bank Negara Malaysia has given an assurance that it is closely monitoring the conditions of the financial markets.

“While ringgit movements will continue to be market determined, BNM’s market operations will ensure sufficient liquidity and orderly financial market conditions,” it said in a statement.

The market opens at 9am today.