Turkey crisis to have minimal, cautious impact on Malaysia
KOTA KINABALU: Analysts believe the ongoing crisis in Turkey will have a “minimal, yet cautious impact” on Malaysia despite the former being ranked as one of the top five of Malaysia’s palm oil exports destinations.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), share of Turkey exports to Malaysia’s total exports were steady for a period of time before skyrocketing in August 2015 due to the implementation of Malaysia-Turkey Free Trade Agreement (MTFTA).
“Since then, share of Turkey exports to Malaysia’s total exports were increasing and hit highest ever share of 1.3 per cent in June 2017.
“In June 2018, the share was registered at one per cent of Malaysia total exports,” it said.
Despite the positive trend, MIDF Research saw that Turkey was not positioned as Malaysia’s major export destinations when compared to other countries such as China, US and Japan.
“With the less significant position, we expect the ongoing crisis in Turkey to have a minimal impact on Malaysia,” it added. “However, Turkey’s rank as one of the top five Malaysia’s palm oil exports destinations remains a concern.”
Turkey is one of the top ten export destinations of Malaysia palm oil export, ranking sixth in 2017 with value of exports worth RM2.02 billion based on the data from Department of Statistics.
The research arm further highlighted that by volume, export to Turkey amounts to 0.68 million tonnes in 2017.
“In view of the recent crisis that hit Turkey lira, we believe that the impact to Malaysia palm oil export is minimal.” it opined.
“Firstly, the export of Malaysia palm oil is diversified across many countries. Note that the contribution of export to Turkey of RM2.02 billion makes up only four per cent of total palm oil exports value of RM46.12 billion.
“Secondly, palm oil volume may not be affected as severe as other items as it is food related hence the consumption volume tend to be more stable.”
Overall, MIDF Research said the impacts of contraction in Turkey’s economy are minimal towards global economy, possibly due to its relative economic contribution.
The research arm, however, noted that further escalating trade war may induce larger economic slowdown in several economies including major and emerging economies.
Exacerbated by greater market uncertainties, weakening currencies and falling business confidence are key downside risks in the medium term.
“Following the simulation results, we noticed the fall in demand from Turkey will cause 0.135 per cent contraction in Malaysia’s total output.
“By sector, among others textiles and textile products, food and beverage (F&B) products, rubber and plastic products, wholesale and retail trade and agriculture products are the top six sectors most impacted in the event final demand by Turkey reduced by one per cent.”