KUALA LUMPUR: The next six months will be crucial for Malaysian trade as it has to remain resilient in view of the uncertain global economic outlook and slower growth expected in the global economy this year.
Malaysian External Trade Development Corp (Matrade) chief executive officer Datuk Dr Wong Lai Sum (pic) said yesterday that the various 2015 economic outlooks from international organisations and local bodies indicate there are a lot of uncertainties in the global economy, and that some moderation is expected to affect world demand, which will impact Malaysia.
“What we need to do now is to sustain our presence in markets, to sustain market shares,” she told the media after speaking on Matrade’s promotional activities this year.
“There will be some form of moderation. I do believe so. It is something we have to watch [over] the next six months to see what happens.
“Every other country is also carefully watching [out for that], whether oil producing or non-oil producing countries,” she said.
Despite the more than 50% plunge in crude oil prices since June last year, the World Bank lowered its global growth forecast for this year on Tuesday to 3% and for next year to 3.3%, due to discouraging economic prospects in the eurozone, some emerging economies and Japan.
The World Bank had earlier in June 2014 targeted global gross domestic product (GDP) to grow by 3.4% this year and 3.3% next year.
Brent crude was trading at near six-year lows of US$48.55 (RM172.83) per barrel yesterday, raising fears that US shale companies may be put out of work in view of high loans taken to fund the shale drilling and exploration business.
The plunge in crude oil prices has also placed pressure on economies reliant on oil revenue, such as Iran, Russia, Venezuela and Malaysia. In Malaysia, the sharp oil decline caused the ringgit to plummet to a fresh 5½-year low on Wednesday at RM3.6020 against the greenback, before rebounding to RM3.5640 yesterday.
Both the World Bank and the Malaysian Rating Corp Bhd had projected that Malaysia’s GDP growth is likely to decelerate to 4.7% this year.
On the lower ringgit, Wong said the effects would be mixed for trade.
“Some say the lower ringgit stimulates exports but actually, the impact of the ringgit on Malaysian industries and exports is a mixed one.
“It depends very much on the sectors. Some sectors have primarily traded in the US dollar, especially the electronics sector, where they buy in dollars and sell in dollars. Naturally, the impact is not very significant for them.
“For industries with resources based in Malaysia, when they export, they get more ringgit. So for them it is absolutely positive. But for industries that are dependent on imported components and content, their inputs will be more expensive,” she said.
She said now is an opportune time for companies to explore alternative sources for content, feedstock and components that are made in Malaysia, as they would be more cost effective for production.
On the impact of decreasing oil prices, Wong said the situation is similar to that of the depreciating ringgit, in that companies that rely on petroleum as feedstock stand to gain from the low oil prices, such as the plastics and petrochemical industries.
Matrade will embark on 116 export promotion programmes in 46 countries across Asia, Europe, the Middle East and the US this year, with an emphasis on the Asean region.
Among the events are the Kuala Lumpur International Aerospace and Defence Business Convention on April 27 to April 29 this year and the Asian Oil, Gas and Petrochemical Engineering Exhibition in June.
This article first appeared in The Edge Financial Daily, on January 16, 2015.