New PM in Town, How does it Look Economically?

Flash Note on the economy by UOB Malaysia

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Malaysia Digital Economy Blueprint
Image for illustration purpose only

On 20th of August 2021, Malaysia’s King announced the appointment of Dato’ Sri Ismail Sabri Yaakob as the ninth Prime Minister (PM) of Malaysia, following the resignation of former PM Tan Sri Muhyiddin Yassin and the entire Cabinet on 16th August after failing to get the opposition on board for a bipartisan vote of confidence.

Fresh elections are ruled out for now due to the pandemic situation, and the next general election is not due until May 2023.

The next hurdle will be the tabling of a motion of confidence in the new PM when Parliament reconvenes on 6th September. Markets will also focus on the selection of deputy PM and key positions in the new cabinet to take charge of finance, trade and investments, health, and domestic affairs.

USD/MYR rose to a high of 4.2460 last week before ending at 4.23 last Friday. Government bond yields have edged up in recent weeks particularly for longer tenures in line with UST yields.

“We do not expect the political changes to derail current economic policies, recovery plans, and vaccination progress. As such, we expect most economic and social sectors to reopen by 4Q21 that paves the way for a rebound in GDP growth supported by a gradual normalization of economic activities and positive spillovers from external demand. We maintain our full-year GDP outlook of 4.0% for 2021 (BNM forecast: 3%-4%) and expect the Overnight Policy Rate (OPR) to stay at 1.75% for the rest of the year”, says Julia Goh, Senior Economist, UOB Malaysia.