KUALA LUMPUR: BMI, a Fitch Solutions company, expects Perikatan Nasional's increased influence to pose challenges to policymaking at the central government level, despite the conclusion of state elections in August.
The research firm said the results of the election imply no change to state governments, although the opposition Perikatan Nasional (PN) increased its number of seats in state parliaments.
"However, we expect Malaysia's improved inflationary backdrop and resilient labour market to help keep social stability risks low. "For now, we maintain Malaysia's Short-Term Political Risk Index (STPRI) score at 71.7 out of 100, which is lower than the regional average of 77.3," it said in a report today.
Additionally, BMI also believes that the weaker-than-expected performance by Pakatan Harapan (PH), will incline the unity government to roll-out race-based policies that favour the Bumiputeras to shore up support among this core group.
"However, there are two main implications of this. First, doing so would cause the coalition government to backtrack from its commitment of implementing needs-based policies as opposed to race-based policies.
"Second, while such policies could prove popular with the support base of the once-dominant Barisan Nasional party, which is part of the unity government, it could stoke tensions with other members of the coalition government including the Gabungan Parti Sarawak and Gabungan Rakyat Sabah, leading to a slowdown in reforms and/or policy gridlock.
"As things stand, the government has announced a targeted fuel subsidy system and is considering a voluntary progressive wage policy to propel the labour market," it added.
The firm also pointed out that there are nascent signs that the unity government, which comprises multiple parties, could face gridlocks over policy in future.
