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

KUALA LUMPUR: Malaysia’s exports surged 14% year-on-year (y-o-y) to RM84.2 billion in April 2018 — the highest reading for the month of April ever recorded. This compared with a 2.2% y-o-y growth in March 2018.

In a statement yesterday, the Department of Statistics Malaysia said the jump in exports was mainly due to growth in manufactured goods, expanding 16.8% y-o-y and mining goods 4.2% y-o-y. By country, exports to Hong Kong rose RM3.4 billion, China (+RM2.2 billion), the European Union (EU) (+RM1.5 billion), Thailand (+RM1.2 billion) and Taiwan (+RM1.2 billion). Imports also rose 9.1% y-o-y to RM71.2 billion in April 2018, mainly due to higher capital imports, particularly aircraft and parts. Higher imports were mainly from the EU (+RM1.8 billion), Singapore (+RM1.5 billion), China (+RM1.4 billion), Taiwan (+RM712.8 million) and Saudi Arabia (+RM646.3 million).

Trade surplus for April 2018 narrowed to RM13.1 billion compared with RM14.7 billion in the previous month, bringing cumulative surplus to RM46.4 billion — up 69% from RM27.5 billion in January to April 2017. MIDF Research is forecasting export growth to average 9.3% in 2018, underpinned by optimistic signs of key global indicators and a gradual recovery in prices of commodities. “In fact, the zero-rated goods and services tax, a tax holiday period until the sales and services tax implementation in September 2018 and a stable retail fuel price will support our exports as it will reduce business cost and eventually increase competitiveness. Nevertheless, protectionism threats remain a concern to the economy,” said the local research firm in a note to clients yesterday.

United Overseas Bank (Malaysia) Bhd senior economist Julia Goh expects a bumpy export growth over the coming months amid concerns that the US and China are headed towards the first round of tariffs. “Any negative spillover in the technology sector will weigh on Malaysia’s electrical and electronics (E&E) sector whereby Malaysia’s E&E exports equal to 37.8% of total exports and 25.7% of gross domestic product (GDP). We maintain our export growth estimate of 9% for 2018 albeit a slowdown in the tech sector and the high base effect will weigh on this year’s export outlook,” she said in a note.

AffinHwang Investment Bank Bhd chief economist Alan Tan believes the trade surplus will remain healthy at RM98 billion to RM100 bilion this year from RM97.2 billion in 2017. However, he cautioned that the country’s export performance will depend on the global economy. “If it continues to improve and global electronic demand remains strong, we expect Malaysia’s exports of goods and services [in real terms] to expand 5.4% for 2018, albeit lower than 9.6% in 2017 partly due to the high base effect,” Tan said in a note. FXTM currency strategy and market research global head Jameel Ahmad said lingering concerns over the ongoing weakness in the manufacturing sector that would risk weighing down on GDP prospects have reduced following another impressive trade balance report for the local economy.

RHB Research Institute Sdn Bhd chief Asean economist Peck Boon Soon said policy tightening in the US and Europe, and cuts in Chinese fiscal deficit could result in reduced demand, causing exports growth to fall between 6% and 6.5% this year. “The ringgit has also moderated compared with that last year. This would have an effect on exports growth too. Last year, exports growth was 22% in nominal terms. In comparison, it was a fantastic year,” he told The Edge Financial Daily.