KUALA LUMPUR: Malaysia is expected to see slower growth in exports year-on-year for December due to the drop in commodity prices and weaker overall external demand.
The Statistics Department will be releasing December and full-year trade data tomorrow.
For November, exports grew 2.1%.
However, Singapore-based economists told StarBiz that the country would not see a trade deficit despite the plunging oil prices.
Oversea-Chinese Banking Corp economist Wellian Wiranto said talk of a current account deficit seemed premature at this point.
He said exports of electrical and electronic (E&E) components, which make up the lion’s share of exports, would hold up the country’s exports position despite the softening commodity prices while United Overseas Bank Ltd economist Ho Woei Chen pointed out that demand for manufactured goods in particular would be helped by growth in the United States.
On the other hand, Nomura Singapore Ltd economist Euben Paracuelles said even if a trade deficit were to appear in the coming months, it would not sustain as the Government had the policy space such as getting government-linked companies to slow investments that would reduce import demand.
Furthermore, he added that fiscal consolidation was still on-going and remained intact supporting Malaysia’s current account.
Paracuelles expected December exports growth to slow to 1.4% from 2.1% in November.
“This would imply full-year export growth of 6.3% in 2014 from 2.5% in 2013,” he said, adding that the trade balance would narrow to RM115.7bil this year compared to the expected RM137.8bil last year.
Wiranto noted that while the rate of exports growth was not “great”, it “was fairly healthy growth given the global headwinds”.
He also said the ringgit weakness would help to boost performance of the E&E sector and would help to cushion the volatility of global demand.
Paracuelles said for 2015, exports would have slower pace of growth due to lower commodity prices with Brent crude prices having fallen by more than half and possible disruption to palm oil production from the floods throughout Malaysia.
“There is a slowdown of growth in China and Europe which is offsetting the pick-up in demand from the United States,” he said. His expectations were underscored by China’s purchasing managers index (PMI), which fell below the 50-point level last month, the first tine since September 2012.
Ho still expects demand from China for manufactured goods despite the slowdown in the PMI.
“At the end of the day, what mattered more was the global end-demand and not so much Chinese domestic demand,” Wiranto added.