Economists Say Big Money Will Leave Malaysia if BN Loses GE13

Economists Say Big Money Will Leave Malaysia if BN Loses GE13

The date for GE13 hasn’t even been set but it seems Wall St has already voted.

The Bank of America Merrill Lynch has warned that capital will flood out of this country if Barisan Nasional loses GE13 and it has also heaped praise on the Prime Minister’s Economic Transformation Programme (ETP) which it calls “the storyline of Malaysia”.

Bank of America (BofA) Asean Chief Economist Chua Hak Bin said in Kuala Lumpur yesterday that if BN fails at the poll “the markets will interpret it negatively in the short term due to the political shock.”

“Generally, the market does not like instability as we saw in 2008,” Chua said.

The bank also noted that a Pakatan victory would be so damaging that it could reproduce the kind of net outflow that followed GE12 in 2008, which saw Malaysia losing funds for 18 months until Najib began to turn things around.

The bank’s comments reflect the view held amongst the international investment community that Najib has been good for the Malaysian economy. The Prime Minister’s ETP has involved substantial government investment in essential infrastructure since 2010 and has also included two rounds of policy liberalisation to allow more foreign investment. Chua says these initiatives have sparked greater interest from investors and have boosted economic growth.

America’s second largest bank predicts most Asian economies will be mid-paced this year, saying that many – including ours – have the capacity to cut interest rates or boost government spending to counter the impact from the global slowdown. It says such stimulus measures are luxuries that economies such as the USA, Britain and Japan can ill-afford.

The bank’s Asian assessment is broadly consistent with this week’s World Bank Global Economic Prospects report (as covered by The Choice this week) which agrees Asean-4 countries (Malaysia, Indonesia, Philippines and Thailand) will retain the capacity to shrug off much of the global turmoil. It says domestic demand will help to offset many of the worst effects of the current conditions.

The World Bank report stated that growth in the East Asia and Pacific region will remain fairly robust due to “strong domestic demand, substantial fiscal space for policy interventions, downside flexibility in policy interest rates, and significant reserve levels.”

The report forecasts the Malaysian economy to grow at 4.9 percent in 2012 and 5.3 percent in 2013.