Economists raise Malaysia export forecasts after surprisingly strong September data

Economists raise Malaysia export forecasts after surprisingly strong September data
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KUALA LUMPUR (Oct 28 ): Economists are expecting Malaysia’s trade sector to sustain its decent growth momentum in the near term as most countries have further reopened their economies, after September’s export growth outpaced expectations when it rose by 24.7% from a year ago.

September’s performance was better than the 18.4% year-on-year (y-o-y) rise in August, and blew past the 14% growth forecast by economists in a Bloomberg poll.

The better-than-anticipated rise in exports also prompted MIDF Research’s economist to raise its export growth forecast to 19.8% for 2021, from its 13.5% projection previously.

This was to take into account the increase in demand for manufactured goods, especially electrical and electronics products, as well as the surprisingly growth in palm oil and petroleum products exports.

Commenting on the latest trade performance, MIDF Research said the recovery in foreign trade activities following the economic reopening from the full lockdown has been "stronger than expected".

The research firm said the recent strength in both exports and imports have been driven by higher demand for commodities, and it believes Malaysia is in a position to benefit from the rise in commodity prices.

This was evidenced by the export growth for the first nine months, which expanded by 24.9% y-o-y despite the weaker 15.8% y-o-y increase in the third quarter this year (3QCY21), compared to the 44% y-o-y growth in the second quarter this year (2QCY21), due to the effect of full lockdown.

Imports growth projections also upgraded

Meanwhile, MIDF Research also upgraded full-year imports growth to 18.9%, from 12.7% growth estimates previously, following an encouraging recovery in imports in recent months.

The upward revision was underpinned by the fact that imports will continue to recover and grow in the coming months, thanks to improved business conditions and increased domestic economic activities, following the relaxation of restrictions and further reopening of the economy, it noted.

Despite the optimism, however, the research firm cautioned that the renewed jump in Covid-19 infections and ongoing constraints in the global supply chain remain as key downside risks, which could affect the strength of growth in Malaysia’s trade sector.

Meanwhile, UOB Global Economics and Markets Research economists Julia Goh and Loke Siew Ting said Malaysia’s gross exports in September beat their estimate of 13%, while gross imports also witnessed robust growth of 26.5%, exceeding the research firm'a projection and Bloomberg consensus of 16.5%.  

“This resulted in a historical high trade surplus of RM26.1billion,” they added.

As most countries have further reopened their economies and global demand continues to recover, both Goh and Loke said Malaysia’s trade sector will likely sustain its decent growth momentum in the near term.

“The seventh straight month of robust imports of intermediate goods implies strong export orders ahead of year-end festive demand,” they stated.

“Other positive catalysts include the resumption of all economic sectors’ operations to full capacity starting October, and an approval to bring in 32,000 foreign workers to ease the labour shortage, which would boost firms’ capability to meet export orders,” they added.

Notwithstanding that, Goh and Loke have their 2021 full-year export growth forecast at 22% and introduce a 2% export growth projection for 2022, partly reflecting year-ago high base effects.

The latest data released by the Department of Statistics Malaysia (DOSM) on Thursday showed that the country's exports recorded the highest monthly value of RM110.8 billion in September 2021, after increasing 24.7% from a year earlier, supported by domestic exports and re-exports.

“Domestic exports amounted to RM87.7 billion and contributed 79.1% to total exports, expanded by 22.4%. On the same note, re-exports with a value of RM23.2 billion grew by 34.1%, y-o-y,” said DOSM.

It also said imports in September 2021 totalled RM84.7 billion, continuing to register a growth of 26.5% or RM17.7 billion, as compared with the same month in 2020.

“Along with the recovery in domestic economic activity due to the implementation of (the) National Recovery Plan in June 2021, the month-on-month performances of exports, imports, total trade and trade surplus were also showing sturdy growth of 16%, 14.2%, 15.2% and 22.2% respectively,” it added.

The DOSM reported that the rise in exports was due mainly to higher exports to Singapore (+RM4 billion), followed by China (+RM3 billion), the US (+RM2 billion), Indonesia (+RM1.7 billion), India (+RM1.4 billion), Hong Kong (+RM1.1 billion), and Japan (+RM879.4 million).

"Meanwhile, China continued to be the major contributor to the increase in imports (+RM4.6 billion), followed by Singapore (+RM2.1 billion), the European Union (+RM1.9 billion), Indonesia (+RM1.6 billion), Taiwan (+RM1.5 billion), the US (+RM1 billion) and Republic of Korea (+RM930.7 million)," the DOSM said.

Lam Jian Wyn