When the political outlook improves in Malaysia, the economic outlook typically improves by a greater proportion. Last month’s election result will boost the political outlook in states held by the victorious Pakatan Harapan coalition, so we expect economic sentiment to improve markedly in those areas. 

When we compared our forward-looking political and economic sentiment indices in the first quarter of 2018 with the same period last year, we found that an increase of one unit in the political sentiment index corresponded to an increase of 1.3 units in the economic sentiment index.

Our survey of 1,000 urban residents, carried out before the election, found that the correlation held in cities located in states governed by the then-ruling Barisan Nasional federal coalition and in those under the then-opposition Pakatan Harapan coalition. 

However, Pakatan Harapan-held states on average showed smaller increases in economic and political sentiment. The median increase in the political sentiment index in those states was 9 per cent, compared with 20 per cent in states held by the Barisan Nasional. The median increase in the economic sentiment index in the former was 27 per cent, compared with 33 per cent in the latter. 

George Town, in Pakatan Harapan-held Penang, was a notable outlier. Despite a fall in the political sentiment index, we saw a higher economic sentiment reading. Penang residents did not attribute a better economic outlook to a rosier political situation.

Although our political and economic sentiment indices have risen, Malaysians have been consistently pessimistic in their outlook for both arenas since we began our survey in the first quarter of 2014. The only exception was in the third quarter of 2014, when our economic sentiment index moved just above the 50-mark separating pessimistic from optimistic territory.

In the May 9 election, Malaysians elected a new federal government for the first time. We expect our political and economic surveys next quarter to show stronger improvement in states that were previously ruled by the Pakatan Harapan coalition.

— Ben Heubl, Data Analyst, FT Confidential Research 

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.