• Malaysian Prime Minister Mahathir Mohamad resigned from his position, relieving ministers from their duties and prompting a shuffle amongst the country’s political parties
• King Sultan Abdullah Ri'ayatuddin accepted the resignation but reappointed Mahathir as interim Prime Minister
• The resignation has brought about uncertainty in Malaysia’s economy, raising questions about policy continuity and the formation of a new government

Uncertainty looms over Malaysia after the shock resignation of Prime Minister Mahathir Mohamad on Monday, 24 February. King Sultan Abdullah Ri'ayatuddin of Malaysia accepted Mahathir’s resignation, sacked the cabinet, but subsequently appointed Mahathir as interim Prime Minister. These events follow the collapse of the ruling coalition over the past weekend and mark yet another chapter in the Southeast Asian country’s longstanding power struggle.

Uncertainty stifles economic growth

Speculations abound about what will happen next, but nothing is certain just yet. As the turmoil brews and the outcome remains unclear, analysts have warned about the situation’s potential impact to the economy, especially if this period of uncertainty drags on.

At the moment, it is “unclear as to how or when a new government will be formed”, said Moody’s Investor Service Sovereign Risk Group analyst Christian Fang in a statement. “Such uncertainty weighs on private investment, and if prolonged, will compound growth challenges and add downside risks to the country’s credit profile, particularly if the new government changes the policy emphasis away from fiscal consolidation and institutional reforms”, Fang added.

BNY Mellon Investment Management senior sovereign analyst Aninda Mitra has echoed the same sentiment. In a statement, he said that, “appointing a new cast to ministerial positions will take a few weeks and could throw into doubt policy cont...

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