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Malaysia: Downside risks expected to persist
KUALA LUMPUR: Given the drop in global trade from the Covid-19 outbreak, coupled with a global tech downcycle and weaker commodity prices, the downside risks on Malaysia’s exports and imports are expected to remain in the near future.
AmBank Research said the downside risks on Malaysia’s exports and imports are reflected by the poor manufacturing activities data from the Markit Manufacturing PMI which is still in contraction in the region.
As such, it noted that Malaysia’s gross domestic product (GDP) growth for 2020 was likely to be around 3%, with an upside of 3.8% and downside of around 2.5%.
In January, Malaysia’s exports fell by 1.5% to RM84.08bil from a year ago and the decline was better than a Bloomberg forecast of a 1.6% decline as trade was impacted by lower exports to China.
Meanwhile, the imports slipped by 2.4% to RM72.08bil in January versus the survey of a 1.4% decline as a result of poor capital and consumption imports with weaker intermediate imports.
Given that the country’s imports fell faster than exports, trade surplus in January remained at a healthy level.
Malaysia recorded a trade surplus of RM12bil in January 2020,4.2% higher compared to a year ago. This was the highest monthly trade surplus for January since January 2011 and the 267th consecutive month of surplus.
Meanwhile, AmBank Research noted that revenue from electrical and electronic (E&E) exports remained lacklustre, down by 5.5% year-on-year, marking the fifth consecutive months of negative growth.
Similarly, it added that palm oil shipments to India plunged by 85.3% year-on-year to 4.69 tonnes in January.
However, the drop in palm oil demand from India was partially taken up by Pakistan, up 111.8% year-on-year at 170.8 tonnes in January.
According to the International Trade and Industry Ministry (Miti), exports of manufactured goods rose by 1.1% to RM71bil in January 2020 and accounted for 84.4% share of Malaysia’s total exports.
The main contributors to the increase in exports were petroleum products which increased by 45.8%, iron and steel products (up 43%), rubber products (up 10.7%), followed by machinery, equipment and parts (up 5.7%).
Moving forward, AmBank Research expects the trade outlook to remain challenging in the near future.
“Impact from the coronavirus, which has disrupted global supply chain and shipping, is likely to continue in the months ahead, ” it said.
Source: https://www.thestar.com.my/business/business-news/2020/03/06/downside-risks-expected-to-persist