KUALA LUMPUR (Nov 22): Fitch Solutions Country Risk and Industry Research said it will likely be raising Malaysia’s short-term political risk index score over the coming days once the new government is formed, and when there is greater clarity with regards to policy direction.

In a note on Monday (Nov 21), the firm however said if a new, stable government is not formed over the coming weeks, it could lead to greater uncertainty and weigh on our growth forecast of 5.8% in Q422 and 4.0% in 2023 as investors take a wait and see approach.

Fitch Solutions said with neither coalition having an outright majority, both PN and PH are now negotiating with their potential partners in a bid to form the next government. PH and PN has ruled out coming together to form the government, leaving BN and GPS as potential kingmakers.

“We reiterate our expectation for political stability to return in Malaysia, once the new government is formed, reinforced by the 'anti-party hopping' bill, which was passed in July and effective October 5.

“The law should prevent another collapse of the new government due to party defections.

“Theoretically, that should also lead to an improvement in the policymaking process, reducing the need for the next ruling government to seek support from smaller parties in order to prevent defections,” it said.