Thursday, 31 May 2018

Could Mahathir’s clean-up spark a financial crisis?

Revelations that Malaysia's public debt is closer to 80% of GDP than previously disclosed 50% is pushing down shares and driving capital outflows

Though few expected the opposition Pakatan Harapan coalition to win Malaysia’s May 9 polls, markets were mainly calm following Mahathir Mohamad’s spectacular return to the premiership.

His appointment of well-respected ministers to economic and finance related portfolios, as well as creation of a council of experienced advisors including a former central bank chief, meanwhile, aimed to reassure investors that his government would remain business-friendly.

But three weeks into Mahathir’s course-shifting term, market skepticism is already starting to creep in. The coalition campaigned on promises to scrap an unpopular goods and services tax (GST), reintroduce petrol subsidies and review toll road concessions. Mahathir has also called for the review of large-scale investment projects awarded during the predecessor Najib Razak’s administration.

Moody’s Investors Service and Fitch Ratings have weighed in with a shared view that GST abolishment could raise government deficits if not offset by other revenue-raising measures. Fitch has forecasted short-term “headwinds” while noting that current economic growth momentum is still strong.

Read the full story at Asia Times.

Nile Bowie is a writer and journalist with the Asia Times covering current affairs in Singapore and Malaysia. He can be reached at