Following GE (General Election) 15 that resulted in an unprecedented hung parliament, with no party able to claim a majority, Malaysia’s political leaders were scrambling to form a coalition government.
Since they are most likely to have a majority, it is customary to ask the party with the most seats to form a government. A government must be able to control a majority in the House of Representatives. Even though there is no formal coalition agreement, this majority can be made up of support from other political parties. If they are unable to do so, the King must be requested by the Prime Minister to extend an invitation to someone else to form a government. At the end of the day the majority coalition has to be formed by willing parties. However if they cannot reach a consensus, the party with the most seats, is permitted to form government without an absolute majority if it has the express, continued support of unaffiliated members, such as small parties and/or independent legislators. This results in a minority government.
Source: Fahmi Reza
Impact of Hung Parliament
According to economists, a hung parliament is bad for the market and the ringgit. Major investment decisions in Malaysia are likely to be delayed until the dust has settled because investors want clarity.
Challenges Facing Next Administration
Whatever the result, fiscal consolidation will continue to be a top priority, though the exact course will depend on which party or coalition controls the government. The new federal government is anticipated to put more emphasis on raising the quality and quantity of investment flows to the less developed states for more inclusive, equitable, and balanced socioeconomic development. This will include improving the quality and delivery of essential public services, particularly in the areas of education, training, basic infrastructure and healthcare.
The administration must be ready to make painful decisions in the interest of the economy even if they are unpopular because all economists predict that 2023 will be a challenging year. Reducing expenditure and boosting revenues will be the key challenges facing the next administration. Debt will rise if no fiscal measures are made. Malaysia’s debt was estimated to have reached RM1.3 trillion in June 2022.
Unfortunately, the focus will be on maintaining power, and populist initiatives will probably take precedence over those that the nation needs.
Source
Hung Parliament – Disaster for Market
