This article first appeared in The Edge Financial Daily on July 6, 2018
KUALA LUMPUR: Malaysia’s exports in May grew 3.4% year-on-year (y-o-y) to RM82.11 billion from RM79.41 billion a year ago, according to the international trade and industry ministry (Miti).
Malaysia’s export growth moderated sharply in May compared with the previous month, which recorded a 14% growth.
The growth was a sharp contrast to Bloomberg and Reuters surveys. Prior to the release of May’s export statistics, Bloomberg and Reuters both had forecast a 6.4% increase in Malaysia’s exports in May.
According to MIDF Research, the slowdown in exports was mainly due to a continuous and larger contraction in agriculture goods (-21.9% year-on-year [y-o-y]). However, manufactured and mining goods continued to expand by 3.2% and 40% y-o-y respectively.
RHB Research Institute economist Vincent Loo Yeong Hong said the slower growth in exports was mainly due to exports of electrical and electronics (E&E) products which slowed sharply to a 2.1% increase y-o-y in May, compared with a 21.3% growth in April.
However, Loo said the slower exports in May were partly mitigated by an acceleration in commodity exports to 13.8% y-o-y (April: +1.5% y-o-y) on the back of higher liquefied natural gas and crude oil exports.
In a statement yesterday, the Department of Statistics said E&E products, which made up 35.5% of total May exports, rose 2.1% y-o-y to RM29.18 billion, while manufactures of metal goods, which accounted for 5.3% of total exports, surged 44.7% to RM4.36 billion.
However, exports of palm oil and palm oil-based products, which accounted for 4.4% of total exports, shrank 24.7% y-o-y to RM3.63 billion due to a decrease in export volume and an increase in average unit value.
Exports to China rose 7.4% to RM27.14 billion in May, while exports to the European Union surged 11.4 % to RM8.92 billion and exports to Japan grew 16% to RM5.57 billion.
However, exports to Singapore contracted by 9.8% to RM11.13 billion and exports to the US reduced by 5.6% to RM7 billion.
May’s imports also came down sharply from a 9.1% rise in April. On a y-o-y basis, the department said imports grew marginally by 0.1% to RM73.99 billion. However, this was better than the Reuters forecast, which estimated a decline of 2.6% in imports in May.
The trade surplus in May rose 47.1% to RM8.12 billion, compared with a year ago. But on a month-on-month (m-o-m) basis, the trade surplus narrowed sharply from RM13.1 billion in April.
Total trade in May grew by 1.8% y-o-y and 0.4% m-o-m, valued at RM156.1 billion.
Both Loo and MIDF Research expects Malaysia’s exports to grow at a rather moderate pace in 2018, due to a high-base effect in 2017 and a slowdown in global trade activity.
“Overall, the deterioration in May’s trade numbers indicates that trade volumes have dampened since 1Q (first quarter) amid a slowdown in global economic activity and growing concerns over the US-China trade tensions,” Loo said in a research note.
Looking forward, Loo expects exports to grow at a healthy pace of 6.5%, albeit slowing from the 18.9% recorded in 2017.
“This is on account of a slightly weaker global trade outlook and a slowdown in demand from China for the country’s exports,” he added.
Meanwhile, the MIDF Research economist forecast Malaysia’s exports to grow 9.3% in 2018, underpinned by optimistic signs of key global indicators and a gradual recovery in commodities prices.
“The moderating pace is mainly due to a high-base effect and in tandem with the expectation of a slight slowdown in overall business performance,” MIDF Research said.
The research house further explained that “nevertheless, brewing trade tensions between the US and not only China but also Europe on top of escalating geopolitical tensions could be headwinds to global trade including Malaysia”.