Fitch Group: Construction industry faces downside risks as political uncertainty persists

Opalyn Mok

G EORGE TOWN, Feb 26 — The current political uncertainty in Malaysia will undermine short-term investor confidence, Fitch Solutions said today.

Fitch Solutions maintained its forecast for Malaysia’s construction sector to grow by 3.5 per cent in real terms in 2020. — Bernama pic

The research unit said the political turmoil does not bode well for short-term growth prospects of the overall construction industry.

“Investors, especially those of foreign origin, will likely put a hold to investment plans and wait out for more clarity on the political situation in the country,” it said in a statement today.

It also maintained its forecast for Malaysia’s construction sector to grow by 3.5 per cent in real terms in 2020.

It said the country’s infrastructure development plans could once again be impacted due to the departure of key policymakers such as Transport Minister Anthony Loke, Economic Affairs Minister Datuk Seri Azmin Ali and Finance Minister Lim Guan Eng.

While it noted the possibility of reappointment of some of these ministers in the next Cabinet, it believed the infrastructure policy could be altered either for the better or the worse of the construction sector.

It pointed out that interim prime minister Tun Dr Mahathir Mohamad’s wavering stance on several big-ticket infrastructure projects has previously caused investor concerns and increased project risks in Malaysia.

“More specifically, the fate of suspended infrastructure projects, such as the Kuala Lumpur-Singapore High-Speed Rail (HSR) project and the MRT3 Circle Line project, continue to hang in the balance, with fresh political uncertainty injected into the mix just as more clarity on these projects had begun to emerge,” it said.

It reiterated its downward revision of Malaysia’s short term political risk score from 72.5 to 69.8 with elevated risks to policymaking and policy continuity.

The research unit noted the growing headwinds to the growth of the construction sector but it will wait for more clarity on the situation before revisiting its forecasts.

Dr Mahathir resigned as prime minister on Monday while the Yang di-Pertuan Agong Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah subsequently announced the dissolution of his Cabinet, marking the collapse of the Pakatan Harapan federal government.

Dr Mahathir was appointed as the interim prime minister while the Yang di-Pertuan Agong interviews MPs yesterday and today to ascertain who commands the majority of the Dewan Rakyat to become the next prime minister.

Related Articles Fitch Group warns of higher Covid-19 outbreak risks in Malaysia due to political upheaval Fitch Group unit revises down Malaysia’s 2020 GDP growth to 3.7pc following Covid-19 outbreak Fitch unit sees KL-Singapore High Speed Rail back on track soon