Malaysian exports weighed down by stronger ringgit

KUALA LUMPUR: Malaysia’s export growth hit a speed bump in November 2017 as it slowed to 14.4 per cent year over year (y-oy) from 18.9 per y-o-y in October, primarily weighed down by the strengthening ringgit.

According to Public Investment Bank Bhd (PublicInvest Research), the ringgit averaged at RM4.16 per US dollar in November 2017, from RM4.22 and RM4.33 in October 2017 and November 2016 respectively.

“The ringgit’s strength is expected to continue in 2018 as Malaysia is set to maintain a strong growth trajectory, predicted to be the second highest in Asean after the Philippines.

“Of note, the ringgit had reached its 1.5-year high of RM4.00 per Dollar on January 5. With a lagged effect in motion, the Ringgit’s strength could gradually affect exports,” said the research arm in an economic update.

Additionally, the stronger ringgit also failed to translate into significantly higher imports with imports for the month jumping 15.2 per cent y-o-y from 20.9 per cent y-o-y in October 2017 to RM73.5 billion – the second highest value in 2017.

While the strengthening ring git is expected to eventually hurt exports, PublicInvest Research reckons that favour could be on our side as the booming global manufacturing activity in advanced economies (AE) like the US, Eurozone, Japan and China could mean sustainable demands for our goods.

“In a nutshell, the improvement in global manufacturing activity will benefit Malaysia given the country’s strong commodity and manufactured goods exports.

“The AEs’ strong manufacturing Purchasing Mangers’ Index (PMI) trends say it all, with the US, Japan and Eurozone all having clocked-in the strongest PMI reading of the year in December.

“Net exports are set to contribute 1.4 per cent to headline growth in 2017, better than 2016’s contribution of 1.0 per cent. This could be tailwind for 2018,” said the research arm.