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Euromoney Country Risk

Country risk: Politics and Covid-19 put Malaysia in a spin

The country is showing one of the more concerning trends among Asia’s emerging markets as politics and economics combine to increase investor risks.

It has been a challenging time for Malaysian investors.

The coronavirus crisis has taken a swipe at economic growth, sovereign debt is rising, and the political landscape is in flux.

This follows then-prime minsiter Mahathir Mohamed’s snap resignation in February and a factional tug of war that has seen current PM Muhyiddin Yassin, a Malay nationalist, gain the upper hand to become prime minister after pulling out of the Pakatan Harapan coalition to form a new alliance.

Najib Razak talks to the media On July 28  

Muhyiddin gained a narrow victory after more recently ousting the lower house Speaker to install his own man, Azhar Azizan Harun. The first convictions against former PM Najib Razak for his part in the 1MDB scandal have further strengthened his hand.

However, Muhyiddin still faces the prospect of a potentially formidable comeback from Mahathir and a strengthened opposition risking early elections, given the inherent fragility of his own multi-party alliance amid the risk of defections.

At the same time the country is struggling with the impact of the virus causing global recession, exacerbated by delayed government policymaking, including the postponed decision on a proposed Kuala Lumpur-Singapore high-speed rail project now that the costs are an even bigger stumbling block.

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