By Sherilyn Goh
Malaysia’s overall external trade performance remains weak, while lower import volume seen in August is a testimony to the anticipated poor export demand in coming months, especially in the manufactured goods sector, according to AllianceDBS Research.
The Department of Statistics released trade data today, which saw August exports expanding 4.1% year-on-year compared to 3.5% in the previous month, while imports have fallen 6.1% during the same period, as compared to the expansion of 5.9% seen in previous month.
“Weak imports have been led by the fall in intermediate goods, following slowing trend in regional economies, especially Singapore and China. Similarly, imports of industrial supply goods, making up around 20% of total imports, also declined 12.3% in August.
“This poor intermediate goods imports follows the weak Malaysian Manufacturing Purchasing Managers’ Index trend, which has fallen below the 50-point threshold since April, indicating a dim outlook in manufacturing output,” said AllianceDBS in its report published today.
While trade surplus in August widened to RM10.2 billion, its highest recorded since November 2014, AllianceDBS noted that this is due to the collapse in imports to contractionary zone in August. Year-to-date August, exports registered a contraction of 1.4%, whereas imports have also contracted by 2%.
According to AllianceDBS Research, the growth in exports was largely led by electrical and electronics shipments which grew by 16.7%, and palm-oil related products which expanded by 2%.
The research house observed that the downtrend in oil and gas exports persisted in August, with the exports of liquefied natural gas experiencing a contraction of 42.3%, whereas refined petroleum products and crude petroleum contracted by 20.6% and 41.2% respectively.
Meanwhile, the contraction in imports was reflected by the decline in intermediate goods (-13.7%) and capital goods (-13.9%), which was somewhat offset by an expansion in consumption goods which grew 13.7% year-on-year in August.
Despite year-to-date August trade surplus of RM54.2 billion stands higher relative to the corresponding period last year which recorded a surplus of RM52.2 billion, AllianceDBS opined that external trade performance is likely to remain weak.
“From the latest World Bank and International Monetary Fund assessments of global growth trajectory in the next few years to come, the balance of risks to growth remains tilted to the downside.
“Looking into Malaysia’s exports exposure by region, Southeast Asia and China cumulatively make up around 40% of total exports. Meanwhile, the United States, euro zone area and Japan respectively make up around 10% each. The tentative macro outlooks in these regions pose downside risks to Malaysian growth performance.
“For now, our base case assumption is that poor global macro and moderation in domestic consumption would weigh down on trade performance in the coming months. Nevertheless, we believe that trade balance would likely remain in surplus position,” explained AllianceDBS Research.
AllianceDBS Research is expecting the second half of 2015 growth to moderate to around 4.2%, from 5.3% in the first half, with full-year gross domestic product to come in at its projected 4.7%.
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