Indicators & Trends

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Malaysia’s exports declineExports fell 27.8% in January to RM38.3 billion from a year ago compared with a contraction of 14.9% in December, according to the Statistics Department. January’s decline is the worst in 15 years and worse than economists’ expectations.The impact of the global economic crisis on Malaysia and neighbouring countries is evident from the trade numbers as exports to Asean, comprising 24% of Malaysia’s total exports in January 2009, decreased by 38.1% compared to a year ago. The decrease was due to lower exports of electrical and electronic (E&E) products, refined petroleum products, chemicals and chemical products, among others.Exports to the US shrank 31.8% to RM4.8 billion from RM7.04 billion a year ago due to decline in exports of E&E products. Exports to the EU declined 29.2% from a year ago mainly due to lower exports of E&E products, iron and steel products as well as crude rubber.Exports of E&E, which contributed 36% of total exports in January, fell by 33% from a year earlier. Sales of palm oil deteriorated 22% in January as crude palm oil prices fell from higher levels a year ago.Meanwhile, imports fell 32% to RM29.5 billion, resulting in a trade surplus of RM8.83 billion in January or the 135th consecutive month of trade surplus since November 1997.Bank Negara Malaysia’s international reserves declined to RM315.9 billion (US$91.1 billion) as at Feb 27, down from RM317.7 billion on Feb 13. The central bank said on March 6 that the reserves position was sufficient to finance 7.6 months of retained imports and is 3.9 times the short-term external debt.On a cash basis, Malaysia recorded lower gross inflows of foreign direct investment (FDI) in 4Q2008. During the quarter, gross inflows of FDI amounted to RM9.3 billion compared with RM21.6 billion in 3Q2008, due mainly to a decline in inter-company borrowings. After adjusting for gross outflows due mainly to repayment of intercompany loans, net FDI amounted to RM3.4 billion in 4Q2008 compared with RM2 billion in 3Q2008. The bulk of the net FDI was directed into the oil and gas sector as well as the services and manufacturing sectors.Overseas investments by Malaysian companies recorded a lower net outflow of RM6.6 billion against RM16 billion in 3Q2008, mainly for investments in the services and manufacturing sectors.Portfolio investment registered a lower net outflow of RM24.8 billion in 4Q2008 compared with outflows of RM38 billion in 3Q2008, as a major move to realign asset allocation by fund managers has largely been completed.Singapore’s economy could contract furtherSingapore’s economy could contract by 8% this year as exports have declined more than expected, the citystate’s Minister Mentor Lee Kuan Yew warned. Nevertheless, he is confident the country will recover faster than other nations. Singapore has projected GDP contraction at between 2% and 5% this year. In January, Singapore’s exports declined by 35%, the sharpest drop ever recorded, from a year earlier. The economy contracted by 16.4% in 4Q2008 at an annualised, seasonally adjusted pace, due to a sharp drop in the production and export of electronics and drugs.US GDP worsensThe US economy contracted far more than previously thought in 4Q2008, according to revised data from the Commerce Department. GDP in 4Q2008 declined at an annual rate of 6.2% instead of a contraction of 3.8% reported in January. The latest figure is the sharpest decline since the 1982 recession, clouding prospects for a recovery this year.Also, the Federal Reserve’s latest Beige Book report suggests that national economic conditions deteriorated further in January through late February. A turnaround is not expected until late 2009 or early 2010.“Looking ahead, contacts from various districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pick-up not expected before late 2009 or early 2010,” the Fed said.

This article appeared in the Corporate page, The Edge Malaysia, Issue 745, March 9-15, 2009