This article first appeared in The Edge Financial Daily on December 6, 2018

KUALA LUMPUR: Malaysia’s exports rose 17.7% year-on-year (y-o-y) in October to a record high of RM96.4 billion, catching economists by surprise as it surpassed the consensus estimate of a 5.8% growth.

The statistics department’s statement yesterday showed that the strong growth was buoyed by a 38.8% increase in liquefied natural gas exports, compared with a 1.8% y-o-y growth in September.

Exports of electrical and electronic products rose 23.3% in October against 6.5% in September.

UOB Malaysia senior economist Julia Goh noted that October’s trade surplus widened to a record high of RM16.32 billion, bringing the year-to-date (YTD) surplus to RM102 billion. YTD exports gained 7.5% while imports rose 5.4%.

“Trade data has been choppy in recent months owing to the US-China trade tariffs, domestic tax policy changes and shorter working months in Malaysia,” Goh said in a note.

“The recent pickup augurs well for growth and the current account in the fourth quarter (4Q18). We think the trade improvements signal potential gains from the ongoing trade tensions,” she said.

Goh noted that October’s export strength came across manufactured (+19.9%) and mining (+29.6%) exports, while agriculture shipments contracted by 12.3% due to lower palm oil exports amid weaker prices.

“Exports across broad regions were strong including G3 (US, Japan and the European Union), China and Hong Kong, Taiwan, South Korea, Asean and Australia,” she said.

Goh is maintaining her gross domestic product (GDP) growth forecast of 4.8% for both 2018 and 2019

Affin Hwang Capital chief economist and head of research Alan Tan does not expect the strong export growth number seen in October to sustain for the remaining two months of 2018.

“We think the November and December export numbers will likely fall back to a single-digit growth, partly reflecting the slower global sales for semiconductors. However, this could be a high single digit given the rebound in the imports of intermediate goods in October [by +1%] compared with a decline of 9.3% in September.

“This positive turnaround is an indication that exporters expect orders to come in ahead of the festive season in December,” he said.

Going into 2019, Tan expects export growth to remain relatively healthy, but at a slower [pace], as it is coming from a high base in 2018.

“However, we think that the strong export numbers in October will support GDP growth in 4Q18, where our expectation is [that] we may see GDP growth recovering from 4.4% in 3Q18 to 4.7% in 4Q18,” he said.

AmBank Group Research chief economist and head Dr Anthony Dass expects exports to grow steadily around 7.2% in 2018.

“This should support the economic performance positively besides growth being driven by private expenditure. We are expecting GDP growth of 4.6% for 2018 and 4.5% for 2019,” he said.

MIDF Research in its note yesterday said that it expects export growth to average 7.3% in 2018.

“Amid higher base effects and signs of easing key global indicators, we foresee exports to expand by 7.3% this year from 18.9% in 2017. This is supported by lower export growth for the first 10 months which registered at 7.5% compared with a double-digit growth of 21.2% in the same period last year.

“The moderating pace is consistent with global commodity prices, expectation of a slight slowdown in overall business performance on top of the uncertainty over [the] Sino-US trade conflict,” the firm said.