Today’s shock victory for former-Prime Minister Mahathir Mohamad in Malaysia’s general election could have far-reaching consequences for the economy. In the near term, there is likely to be a sharp deterioration in the fiscal position, if as expected, Mahathir pushes ahead with plans to scrap the country’s Goods and Service Tax (GST). More positively, however, his victory opens up the possibility that Malaysia will finally start to tackle some of the institutional problems that are holding back the country’s long-run prospects.
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