Malaysia: Political Tensions Remain

This inclusive approach will continue to constrain Anwar's progressive agenda, as the government refrains from dismantling ethnic-Malay preferences. Policies such as affirmative action for bumiputera (ethnic Malays and indigenous peoples) in education and corporations will therefore remain intact, preserving the support of the pro-Malay bloc within the PH parliamentary majority.  However, the political landscape may witness increased ethnic tensions over discriminatory policies favouring bumiputera, potentially straining the unity government.  As a consequence, Anwar will attempt to balance tackling race-related reforms with initiatives aimed at economic growth, anti-corruption measures, and institutional reforms. Recent initiatives include separating the attorney-general's chamber from the public prosecutor and introducing a political finance act. Meanwhile, the government's shift from blanket to targeted subsidies in 2024 will aim to support the lower-income group.  This backdrop all leaves the political violence measure at medium.

Although a unity government is usually a recipe for political instability, the unity of this government is reinforced by the law against party-hopping and the reluctance of the Barisan Nasional (BN, part of coalition) to collaborate with the opposition Parti Islam se-Malaysia (PAS). Further, despite concerns over UMNO's weakened state, following corruption charges against its leader Ahmad Zahid Hamidi, the unity government's stability remains intact.

On the geopolitical front, all appears favorable. Malaysia’s foreign policy focuses on pragmatism, maintaining balanced relations with various countries. Therefore, Malaysia will continue to avoid taking sides between the US and China, emphasizing engagement with established groups like ASEAN, the UN, and the Organization of Islamic Co-operation. This all helps economic stability and exchange transfer remains medium.  Sovereign non-payment risk remains medium, with the government debt/GDP ratio elevated though not high at 67% of GDP.