- Malaysian Prime Minister Najib Razak will be going up against old political foes and a record number of candidates.
- The country's rising cost of living, worsened by the unpopular Goods and Services Tax and depreciation of its currency, will be among issues on voters' minds.
- Experts predict a slim victory for Najib, even if momentum for the opposition has been gathering.
Amid a fierce political contest, Malaysia will be holding both federal Parliament and state assembly elections on Wednesday.
Stakes are high for Malaysian Prime Minister Najib Razak, who is already weathering a multi-billion dollar scandal involving state fund 1Malaysia Development Berhad (1MDB). He is going up against a record number of candidates and battles in several states, and the results will determine his political future.
Najib faces tough competition from old political foes — Malaysia's longest-serving, battle-hardened former prime minister, Mahathir Mohamad, who has joined forces with opposition icon Anwar Ibrahim. The latter politician is leading the charge from prison after being thrown into jail for sodomy in 2014 — an incarceration he says was politically motivated.
The main players include the ruling Barisan Nasional coalition, which is expected to win by a narrow margin, and opposition parties Pakatan Harapan, a coalition led by Mahathir, as well as Parti Islam Se-Malaysia.
Mahathir, who led the country from 1981 to 2003, was once Najib's mentor.
Mahathir was mentor to Anwar at one time as well. If their attempt to oust Najib is successful, he reportedly plans to pardon Anwar and hand the role of prime minister down to him.
The general election will see a record number of 2,333 candidates, an increase from 1,899 in the 2013 elections.
Campaigning ends on Tuesday. Polling Day, when citizens get to vote, falls on Wednesday.
The decision to set the vote during the middle of the week was seen as discouraging millions of Malaysians living abroad from returning home to vote. However, outraged Malaysians took to social media to offer funding and other services to help people return home to vote.
Low voter turnout is expected to favor Najib's coalition.
Under the Malaysian electoral system, voters submit two votes: One for state government and another for federal government.
In total, 222 parliamentary seats, and 505 state assembly seats in 12 states, will be up for the taking, decided by almost 15 million Malaysians who are eligible to vote. A 13th state, Sarawak, has already held its election.
The country's rising cost of living is a hot topic, and a Goods and Services Tax (GST) introduced in 2015, as well as the depreciation of the ringgit, have hit many Malaysians.
Najib has promised to almost double cash handouts to low-income households. The opposition says it will scrap the GST if it wins.
Despite the 1MDB scandal — the fund is being investigated for money-laundering and graft in at least six countries — corruption issues are not expected to hurt Najib's chances.
Najib — who was cleared of any criminality by Malaysia's attorney general — and 1MDB have both denied any wrongdoing.
"The big issue is cost of living — other issues like corruption are secondary to Malaysians' bread and butter," said Rashaad Ali, research analyst at the S. Rajaratnam School of International Studies.
Importantly, no one has been convicted of any crime connected to 1MDB, though investigations are still pending, noted Zeger Van Der Wal, associate professor at Lee Kuan Yew School of Public Policy.
Malaysia's attorney general has cleared Najib of any wrongdoing.
"We certainly can conclude that the prime minister is a very skillful political player ... when there's a skillful politician that still has considerable popular support, you'll also see that they tend to survive scandals like this," Van Der Wal said.
Investors are watching the election because Malaysia is among six emerging economies where elections this year have "the potential to move markets," according to a UBS report in February.
Because the Goods and Services Tax and currency are major voter concerns, the outcome of the election will likely affect the country's economic policies.
"A weakened Najib would have less political capital to push ahead with post-election fiscal consolidation, though he would not likely go as far as scrapping the unpopular GST, which has exacerbated concerns over the rising cost of living," Peter Mumford, director of Asia at risk consultancy Eurasia Group, said in a note.
Similarly, Najib's plans for infrastructure projects and a pivot toward China could be in jeopardy if victory goes to Mahathir, Mumford said.
Momentum for the opposition has been gathering, and experts believe that will narrow the margin of victory for Najib.
Consulting firm Eurasia Group says there's an 85 percent chance that Najib will win.
Research firm Capital Economics said in an April note that Najib's chances will be improved by "years of gerrymandering" that will make it easier for the government to collect a majority. It also claimed that "wildly" different sizes of parliamentary constituencies meant it was much easier for him to win a majority.
In response, a Malaysian government spokesperson told CNBC that the redrawing of electoral boundaries to account for population growth is a "perfectly normal practice" that has been applied in democracies around the world.
"In Malaysia, these changes were proposed and implemented by the independent Election Commission and subsequently approved by the judiciary, whose impartiality is evidenced by the fact that it frequently rules against the government and senior ministers," the statement said.
A survey released by pollster Merdeka Center last week showed the opposition making gains, but not enough to land a majority of parliamentary seats.
Mahathir's Pakatan Harapan coalition is likely to win 43.7 percent of the popular vote, while Najib's coalition is expected to draw 40.3 percent, Merdeka Center said last week.
Under Malaysia's system, the party that gets the most seats in parliament wins — even if it does not win the popular vote.
—Reuters contributed to this report.