Ong: US-China tension initial impact on trade minimal
Domestic economy remains resilient with consumer sentiment turning optimistic after four years, says analyst
THE impact of trade tensions between the United States and China on Malaysia has so far been minimal despite lowerthan-expected export and import growth in May.
Analysts, however, have struck a more cautious tone, citing concerns about a second-round impact on the country’s economy in the second half of the year and beyond.
The domestic economy showed resilience amid trade tensions, with consumer sentiment turning optimistic after four years, said an analyst.
Deputy International Trade and Industry Minister Dr Ong Kian Ming said according to a task force set up to monitor the development of a trade war, “the initial impact is relatively minimal”.
“We are observing the situation closely on a day-to-day and weekly basis.
“The government is concerned about the issue and will continue to monitor the situation together with the task force,” said Ong after officiating at a seminar to increase awareness on a traceability system that helps ease market access into China.
The task force will devise strategies to ease the impact of trade protectionism and coordinate feedback from stakeholders on the increase in US-China trade conflicts.
Exports in May grew 3.4 per cent year-on-year (y-o-y) to RM82.1 billion, below Bloomberg’s survey of a 6.4 per cent increase.
Imports, on the other hand, had been expected to grow 0.2 per cent y-o-y in May but fell short to 0.1 per cent. Trade data for June is expected to be released on Monday.
Nomura said fears of a trade war was adding pressure on global growth.
Given the elaborate global supply chains (especially in emerging markets and Asia), the secondround of impact may affect countries not directly involved in trade conflicts, said Nomura.
“This, we believe, could be a major external risk for an economy such as Malaysia which is highly intertwined with global supply chains,” said the firm.
For an open economy such as Malaysia, with overall merchandise trade to gross domestic product (GDP) of more than 120 per cent, Nomura said highly disruptive trade wars could significantly hurt its economy as well as investor sentiment.
“Our economic team estimates that Malaysia’s ultimate exposure to the US — including via intermediate goods to China for assembly into final products destined for the US — is at around 10 per cent of GDP, of which about half is in electronics products.”
MIDF Research said protectionism threats were a concern to Malaysia but the domestic economy remained resilient.
With the abolishment of the Goods and Services Tax (GST) and sound macroeconomic environment, consumer sentiment surged to an optimistic level of 132.9 points, the highest in 21 years.
“Apart from GST, stable retail fuel prices will keep inflationary pressure low, thus supporting domestic demand,” it added.