PRE-ELECTION spending will cause a spike in economic activity that would benefit many ordinary Malaysians, said an economist, as political parties splurge on their campaigns ahead of the 14th general election.

At the same time, allocations for farmers, fishermen and low-income folk under Budget 2018 will start to kick in and this will also fuel the economy, said Azrul Azwar Tajuddin.

“I’ve detected this trend of an uptick in economic activity in previous general elections in 2008 and 2013,” said Azrul, who is chief economist of Jasmiza Solutions.

“There will usually be an increase in economic activity in the months leading up to the elections as parties spend on paraphernalia, travelling and events for their campaigns.”

This spending would benefit businesses dealing with printing and clothing, food, transport, event management and accommodation, such as budget hotels and homestays, Azrul told The Malaysian Insight.

Increased spending by political parties could also spill over until after the elections, which he predicted would be called either in the first weekend of May or third weekend of July.

He estimates that growth for 2018 will average between 5% and 5.5%. In contrast, the economy grew by 5.9% from January to September 2017.

GE14 has to be called by August. Azrul and other political analysts have predicted that GE14 would be called after the March-April sitting of Parliament but before the Ramadan fasting month which begins on May 16.

The first sitting of the sixth parliament session has been scheduled from March 5 to April 5.

The first weekend of May falls on May 5-6. It is unlikely that the government will call the elections on the second weekend of May as it falls on May 13, he said.  

The other window is the third weekend of July before the first haj flights are expected to start in conjunction with this year’s pilgrimage season.

Three coalitions are expected to face off for control of 222 parliamentary seats in GE14. They are the ruling Barisan Nasional and the two opposition coalitions – Pakatan Harapan and Gagasan Sejahtera Rakyat.

To strengthen its traditional rural support base, the BN government increased several aid schemes in the 2018 budget to benefit those in the agricultural sector and the country’s roughly 1.6 million civil servants.

Prime Minister Najib Razak announced RM6.5 billion in several schemes for farmers, fishermen and those rearing livestock.

Apart from the one-off RM1,500 special payment to civil servants, support staff will receive a second time-based promotion after 13 years from the first promotion.

Azrul does not expect any major economic shock to occur no matter the results of GE14 as long as the coalition that wins is committed to maintaining the country’s strong fundamentals.

He disagreed with worries that the ringgit’s value would be impacted by who wins the polls.

“There could be a knee-jerk reaction after the results are announced. But this is expected to last two weeks at the most. The ringgit’s value will then go back to being based on economic fundamentals.”

For 2018, Azrul estimates that the ringgit will hover between RM3.90 and RM4.10, and continue to strengthen against the US dollar.

The value of the ringgit is being driven by sound fundamentals, sustainable economic expansion, lower inflation, prudent fiscal policy and rising foreign exchange reserves, he said. – January 18, 2018.