KUALA LUMPUR, May 10 (Xinhua) -- The unexpected success by former Prime Minister Mahathir Mohamad-led opposition coalition at Malaysia's 14th general election may lead to market and policy uncertainties in the immediate term, but in the long run, it will provide Malaysia the chances to start tackling some of its institutional problems that are holding back the country's prospects, said foreign and Malaysian analysts here Thursday.

The opposition's win in the election marked uncharted territory for Malaysia because the country has never witnessed a transition of power away from the Barisan Nasional (BN) since its independence in 1957, said Moody's Investors Service's sovereign risk group senior analyst Anushka Shah in a note.

"Little is known about the opposition's full range of economic policies, and its electoral pledges have lacked details that would allow for a full assessment of their budgetary and macroeconomic impact," she said.

She believed that some campaign promises, if implemented without any other adjustments, would be credit negative for Malaysia's sovereign.

These include a proposed abolishment of the goods and services tax (GST) which, without offsetting measures, would increase Malaysia's reliance on oil-related revenues and, in the near term at least, narrow the government's revenue base.

Another policy pledge, the reintroduction of fuel subsidies, would also distort market-determined price mechanisms, with effects on both the fiscal position and balance of payments, she added.

DBS Group Research concurred with Moody's, saying in a report that the opposition's policy platform may not please markets, for instance, the pledge to abolish the GST could dent the fiscal outlook if followed through.

"At a time when emerging markets are seeing a rise in funding costs and sustained currency weakness, Malaysia's markets have held up well so far this year, thanks to recent fiscal reforms and the upside coming from rising oil prices. Whether these gains can be preserved is now open to question," it said.

Nomura Research also foresaw some uncertainties for Malaysian market in near term as there are numerous issues which investors need to consider.

These issues include whether the transition of power from the ruling Barisan Nasional (BN) to Pakatan Harapan (PH) is smooth, clarity on important policies such as GST and public sector spending, whether the four-party alliance of PH with a slim majority can work well, likely cabinet appointments, path of economic reforms and, lastly, how policy uncertainty will affect business sentiment.

"We believe this uncertainty is unlikely to enthuse investors and will likely increase the risk premium of the market," it said.

RHB Research Institute also highlighted in its report, the surprise victory of the opposition in the election might see investors exit the market, given the ensuing uncertainty over economic policy, continuity and priority.

"Some major government-funded construction projects may be reviewed, while some businesses may delay their investments until there is further clarity," it said.

The research house projected the fiscal deficit to widen if the incoming PH government fully implements the measures in its election manifesto.

It estimated Malaysia's real GDP growth forecast for 2019 to decrease to 4.6 percent year-on-year (from 5 percent) while the budget deficit may potentially widen to up to 4.5 percent of GDP, unless further clarity is given to reassure investors.

Despite foreseeing some uncertainties in near term, some analysts such as Capital Economics, opined that the historic election does raise the possibility that Malaysia could finally start to tackle some of the institutional problems that are holding back the country's long-run prospects.

"The key factor behind PH's victory was the 1MDB scandal, which has tarnished the country's international reputation. Mahathir now has a clear mandate to carry out his pledge clean up the government," it said.

The research house also pressed the need of change for the system of affirmative action that gives numerous privileges to ethnic Malays and disadvantages those from other ethnic groups.

In addition, IHS Markit Asia Pacific maintained its forecast that Malaysian economy would grow at 5.5 percent this year, supported by continued strong manufacturing exports and the upturn in the oil and gas sector. Malaysian economy grew at a rapid pace of 5.9 percent in 2017.