Malaysia: Diverse exports to mitigate lockdown impact

KUALA LUMPUR: Malaysia’s diverse export destinations and products should help to mitigate the impact of a prolonged national lockdown through the end of June, according to Moody’s Investors Service.

Malaysia imposed a nationwide lockdown since June 1 after daily Covid-19 cases hit 8, 000. From an initial two weeks, it was extended for another two weeks.

In its latest report, the ratings agency said the resurgence in coronavirus cases, along with low vaccination rates in the Asia- Pacific (APAC), pose renewed risks to domestic demand, although the recovering global trade will support the region’s more export-oriented economies.

“Fresh movement restrictions to stem the spread of the virus will curb domestic demand and dampen consumer confidence.

“Meanwhile, vaccination rates are low in most parts of APAC, with only Maldives, Mongolia, Singapore and China having administered a first vaccine dose to at least 40% of their populations, ” said Nishad Majmudar, Moody’s assistant vice-president and analyst.

But in economies that are export-oriented, including Vietnam (Ba3 positive), Taiwan, China (Aa3 positive) and Malaysia (A3 stable), large contributions from trade will compensate for weak domestic demand and bolster output – as long as coronavirus-related closures of factories and export-processing sites are limited.

Vietnam’s robust exports have helped its economy grow amid the pandemic – its exports expanded 8% in the first quarter of 2021 compared with the fourth quarter of 2020 on a seasonally adjusted basis.

Likewise, in Taiwan, exports grew 8% in Q1 of 2021 from Q4 of 2020 and 16% from a year earlier, powering an 8.9% surge in gross domestic product (GDP).

“Malaysia’s diverse export destinations and products should help to mitigate the impact of the extension of its national lockdown through the end of June.

“Moody’s forecasts a growth of 7.2%, 4.2% and 5.3% respectively, for these economies, ” it said.

Meanwhile, the rebound will be more tepid for economies that are also dependent on international tourism, such as Thailand (Baa1 stable).

Moody’s expects Thailand’s GDP to expand 2.8% in 2021 – a relatively shallow pickup from a 6.1% contraction in 2020, reflecting the lagged recovery in the tourism industry. — Bernama