A sweet September for the economy

Malaysia exports

PETALING JAYA: Malaysia’s solid trade surplus in the July-September period is set to boost the country’s economic recovery in the third quarter of 2020.

A fortnight before the third-quarter gross domestic product (GDP) results will be unveiled on Nov 13, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid (pic below) said the country’s trade surplus widened to RM60.4bil in the third quarter compared with just RM27.6bil in the second quarter.

“This would mean net exports are expected to contribute positively to the third quarter GDP. Such a performance is very much in line with JP Morgan Global Purchasing Managers’ Index, which rose to 52.1 points at the end of September from 47.9 points at the end of June this year.

“So, we should expect a strong recovery in the third quarter GDP, ” he told StarBiz.

However, Afzanizam cautioned that the sustainability of the recovery momentum remained vulnerable, especially after the conditional movement control order (CMCO) was implemented in key locations from mid-October to mid-November.

MIDF Research also expects the third quarter GDP to positively benefit from the country’s external trade surplus.

The country’s exports outlook will continue to be supported by sales of selected products, particularly electrical and electronics (E&E), palm oil and rubber products, according to the research house.

“We expect an overall increasing trend in sales of these goods to continue for the remainder of the year in line with resumption of activities globally.

“Despite the recovery, outbound shipments will remain lower than last year’s levels as multiple downside risks remain prevalent including the new wave of Covid-19 cases and rising protectionism. This will hinder the economic recovery process of most countries, ” it said.

MIDF Research has maintained its export growth forecast for 2020 at a contraction of 3.5% year-on-year (y-o-y).

“With the latest performance in Sept 2020, Malaysia’s year-to-date exports growth averaged at a negative 3.7% y-o-y, just a shade below our full year forecast of negative 3.5% y-o-y, ” it added.

Malaysia’s exports in September expanded by a stronger pace of 13.6% to RM88.93bil, far exceeding a Bloomberg survey of a 1.7% increase, as shipments of manufactured products jumped.

In a statement yesterday, the International Trade and Industry Ministry (Miti) said the latest exports value was the highest ever recorded for the month of September.

It is also noteworthy that the export growth in September was the strongest since October 2018.

“Exports of manufactured goods in September 2020, which made up 87.7% of total exports, picked up by 16.3% y-o-y to RM77.99bil.

“The expansion was due mainly to higher shipments of electrical and electronic products, rubber products, and other manufactures like solid-state storage devices, iron and steel products as well as optical and scientific equipment, ” it said.

Exports of agricultural goods surged by 26.6% to RM6.55bil compared with September 2019, buoyed largely by higher exports of palm oil and palm oil-based agriculture products.

Exports of mining goods declined by 27.4% y-o-y to RM4.02bil on account of lower exports of liquefied natural gas.

Looking into the exports data by destination, MIDF Research said in a note that there was “a ray of hope from some Asean countries”.

Exports to Asean countries in September grew by 6.7% y-o-y, indicating that demand from the bloc may have started to recover.

“For instance, exports to Vietnam (up 6% y-o-y) and the Philippines (up 5.8% y-o-y) expanded during the month after a few months of negative growth.

“In addition, exports to Singapore recorded a substantial increase of 13.7% y-o-y compared to almost a flat reading in the previous month mainly due to strong sales of E&E products (up 50.2% y-o-y) which accounted for more than 50% of Malaysia’s total exports to the country, ” said MIDF Research.

Imports, meanwhile, shrank by 3.6% y-o-y to RM66.96bil from RM69.44bil a year ago.

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