Economists: Exports likely to continue contraction

MIDF Research, in its report, expected exports to contract further at 8.3% y-o-y.

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PETALING JAYA: Exports are expected to continue their contraction this year on weaker global demand arising from the Covid-19 pandemic, according to economists.

“I am not surprised at the latest trade data. Weak global demand and weak commodity prices will affect exports as most of our trading partners are still battling with the Covid-19 outbreak, ” Socio-Economic Research Centre’s executive director Lee Heng Guie (pic below) told StarBiz.

Although China has reopened its economy, demand is still weak generally. The major exports such as electrical and electronics (E&Es), palm oil and crude oil are still weak, ” he said.

Lee expected exports to shrink by 11.2% for this year.

“Export growth of 1.1% year-on-year (y-o-y) in the first quarter also suggests that Malaysia’s first quarter gross domestic product (GDP) will likely remain sluggish. Given that March will partially reflect the impact of the movement control order (MCO), we will most likely see a contraction in the first-quarter GDP, ” he said.

MIDF Research, in its report, expected exports to contract further at 8.3% y-o-y.

“The outbreak has emerged as the top risk to global trade flows as it affects both supply and demand of goods. This includes Malaysia particularly with almost two months of MCO which disrupted production and eventually exports, ” MIDF Research said.

It said there has been an increasing threat to foreign trade as the pandemic spread rapidly in Europe and the United States.

“China’s latest external trade performances showed some improvement, however, the sustainability of it remains questionable, ” the research house said.

Exports of E&E products which hold around a 34% share of total exports further declined by 13.9% y-o-y and it is in its negative streak for the eighth month, it said.

It expected exports performance of E&E products to remain gloomy.

According to trade data released at noon yesterday, Malaysia’s March exports fell 4.7% to RM80.12bil from RM84.06bil a year ago.

This is due to a drop in E&E products and the MCO that took effect from the second half of March.

The Statistics Department said the main products which contributed to the decline in exports were E&E products (RM4.4bil), liquefied natural gas (RM518mil), timber and timber-based products (RM293mil).

The other products which recorded a decline were crude petroleum (RM101.6mil), palm oil and palm oil-based products (RM48.8mil) and natural rubber (RM29.6mil). However, higher exports were recorded for refined petroleum products (RM2.2bil).

According to a Reuters survey of analysts, the decline was however smaller than the 8% fall that was forecast.

Exports in February had risen 11.8%, the strongest y-o-y growth in 16 months.

Chief Statistician Datuk Seri Mohd Uzir Mahidin said the first quarter trade data showed trade rising by 1.2% to RM440.4bil from the previous corresponding period.

Exports rose by 1.1% to RM238.7bil from a year ago while imports added 1.3% to RM201.7bil.

“Imports and exports rebounded to register a positive growth after declining for four quarters in 2019. Trade surplus in the first quarter rose marginally by 0.1% to RM37bil” he said.

“The growth was attributed to higher exports to Indonesia, Singapore, the United States and South Korea. Meanwhile, higher imports were mainly from the United States, South Korea, India, Saudi Arabia and Indonesia, ” he added.