KUALA LUMPUR, Jan 9 — Political stability and good governance will have significant bearing on Malaysia’s economic performance amid expectations that 2023 would be a tough year, local think tank Socio Economic Research Centre (SERC) said today.

It predicted the country’s economic growth to slow by half to 4.1 per cent this year.

"The unity government has to ensure a stable and a good political and economic ecosystem, the key precondition to rebuild business and investors' confidence,” SERC said in its 2023 economic outlook released this morning.

"Both micro and macro narratives must be backed by good execution of institutional and economic reforms while considering the timing and pace of reforms to smoothen the transitory impact of the economy,” it added.

Some pundits are sceptical that Prime Minister Datuk Seri Anwar Ibrahim's coalition government could last a full five-year term without any turmoil given its fragile composition.

Anwar leads the Pakatan Harapan coalition, which won 82 of 222 parliamentary seats – the largest number – in last November’s general election.

But failing to win a simple majority of 112 seats still makes Anwar beholden to the support of other parties beyond PH.

The power-sharing arrangement could also force Anwar to make certain concessions and upend his reform drive, these analysts predicted.

Anwar, however, vowed that his government would not compromise on corruption and that good governance will remain a top priority.

Political party leaders who backed Anwar’s leadership recently signed an agreement pledging loyalty until the next general election is called.

These included former adversaries such as Barisan Nasional, Gabungan Parti Sarawak, and Gabungan Rakyat Sabah, which is currently undergoing an internal crisis that could see a state government change that could affect federal support.