Thursday 28 Mar 2024
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This article first appeared in Corporate, The Edge Malaysia Weekly, on October 24 - 30, 2016.

 

A narrower current account surplus of RM14.8 billion is projected for 2017, down RM1.7 billion from the 2016 forecast.

According to the Economic Report 2016/17, this year will see the surplus in the goods account shrink to RM97.9 billion — down RM11.7 billion from 2015 — due to subdued global trade and prolonged low oil prices.

On the upside, higher receipts are expected to contribute to an increased surplus of RM29.3 billion in the travel account. Relaxation of visa policies, attractive holiday packages and more international flights to new markets are set to push up travel receipts by 3.4%.

The services account is expected to remain in deficit at RM22.1 billion, largely attributed to higher payments for freight and other services.

The transport account will also post a deficit of RM25.8 billion due to greater reliance on foreign freight services, although inflows of various service charges will be sustained at RM15.7 billion.

Major infrastructure projects requiring the import of professional, management consulting, technical and trade-related services are expected to increase gross payments to RM25.7 billion in 2016 from RM22.9 billion in 2015.

Another contributor to the widening deficit is expected to be higher gross outflows in the services account, which include business payments, leisure, education and medical treatment — a marginal increase to RM41.5 billion is  forecast for this year from RM41.3 billion in 2015.

In the first half of 2016, a lower current account surplus of RM6.9 billion was recorded because of a smaller surplus in the goods account, which moderated to RM43.3 billion due to smaller export gains from commodities.

Also contributing to the reduced surplus was a continued deficit in the services account — RM11.5 billion — due to large net payments for transport, insurance, construction and professional services.

On the bright side, the income accounts recorded a lower deficit compared with the second half of 2015, down from RM30.6 billion to RM24.9 billion, due to reduced outflows of investment income to foreign companies in Malaysia and foreign worker remittances.

However, both the primary and secondary income accounts are projected to see bigger deficits this year.

The primary income account, comprising investment income and employee compensation, is expected to post a deficit of RM35.4 billion, compared with RM32 billion in 2015.

This follows projections that the deficit in the investment income account could widen by RM28.9 billion following higher payments of profits, dividends and interests by foreign investors in Malaysia. Employee compensation may also see a larger net outflow of RM6.5 billion following continued demand for foreign professional skills and technical expertise.

In the secondary income account, higher foreign worker remittances are expected to contribute to a RM2 billion increase in net outflow by end-2016.

On a more positive note, the current account surplus forecast for 2016 was revised upwards to RM16.4 billion from the RM11.3 billion projected in the previous Economic Report.

The actual figure for 2015 also exceeded expectations at RM34.7 billion. In the Economic Report 2015/16, it was projected to come in at RM23.4 billion.

 

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