RAM expects lacklustre export growth at 3.1% in December


  • Business
  • Wednesday, 30 Jan 2019

RAM

KUALA LUMPUR: RAM Ratings expects Malaysia’s export growth to remain lacklustre at 3.1% in December 2018 (November 2018: 1.6%) while export stimuli for Malaysia will remain limited through the next few months.

The rating agency said on Wednesday the lacklustre exports in December were due to back of weaker demand from key markets as front-loading activities dissipate. 

“Exports of major open economies in the region declined on-year in December, signalling slower global demand. 

“Businesses may also hold back orders while awaiting more clarity from the US-China trade dispute,” it said. 

The two economic giants called a 90-day truce on Dec 1, 2018, to facilitate negotiations. 

In line with weaker demand for intermediate input for exports, imports are projected to contract by 3.1% in December, giving rise to an overall trade surplus of RM12bil.
 
“Looking ahead, export stimuli for Malaysia will remain limited through the next few months amid uncertain global demand, chiefly arising from the US-China trade talks. 

“This scenario is reinforced by the expectation of muted demand from two of Malaysia’s largest export markets (i.e. China and Singapore), as indicated by the downtrend in their manufacturing export orders,” it said. 

RAM said the less upbeat business optimism of export-oriented firms in Malaysia in relation to 1H 2019 - as captured by the RAM Business Confidence Index - suggests headwinds against exports in early 2019. 

Despite the prevailing global uncertainty and volatility, the approved value of foreign investments in the manufacturing sector surged to RM33.6bil in 3Q 2018, bringing the total approved value to RM48.8bil for the first nine months of 2018 (2017 total: RM21.5bil). 

RAM also pointed out there was also a discernible increase in interest in the chemical and electrical & electronics sectors, which RAM had previously identified as the key sectors in which Malaysia could benefit from the trade divergence arising from the US-China trade war. 

“It is very encouraging that Malaysia remains relevant and a key node in the global value chain. 

“If these approved investments materialise, Malaysia will have added capacity to fully reap the benefits of these trade-diversion, thereby supporting exports over the longer term,” said Kristina Fong, head of research at RAM. 
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