Malaysia’s exports to grow at solid pace from strengthening global economy

KUCHING: Malaysia’s exports will remain growing at a solid pace this year as synchronised economic performance in both major and emerging economies are expected to boost the country’s trade performance, analysts observed.

In a recent report, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted that the current outlook for the global economy is positive as major international economic bodies have projected positive recovery in the global trade market.

It pointed out that the International Monetary Fund (IMF) recently maintained its global growth forecast at 3.5 per cent as it is optimistic with the current global development in particular global trade activities.

“Based on current trade performances, we would expect Malaysia’s export growth for July to remain sanguine as global demand as well regional are seen continuing on uptrend momentum,” the research team opined.

However, it cautioned that recent events in the US has re-incited global trade risks.

“The Trump-led administration last week passed the bill sanctioning Russia over its interference in the US 2016 election and military operations in Ukraine.

“The sanction however being opposed by most of European Union ( EU) leaders as it could affect EU energy- companies that involve in Russia’s oil industry.

“We opine if political instabilities between the US, EU and Russia prolong, it could posed major risk factors to global growth,” it commented.

“On the other hand, the US may impose broader sanctions on Venezuela due to its sham election in July. In the short term, sanction threat on Venezuela indirectly push up global oil price above US$ 50 per barrel last month and thus we foresee the increase in the price will benefit Malaysia via higher value of petroleum-related exports for the month of July,” it opined.

Meanwhile, on Malaysia’s trade performance in June, MIDF Research noted that despite the slowdown in growth, exports performance beat imports in June 2017 by 10 per cent year- on-year ( y- o-y) compared with 3.7 per cent y- o-y respectively.

“In our previous report, we already expect the slowdown in export growth due to high base effect. June’s export number is 10 per cent y- o-y, higher by 1.8 per cent points from our 11.8 per cent estimated export growth.

“While the consensus estimate for export growth stands at 18.3. per cent y- o-y.

“On monthly basis, both export and import shrank by eight and 14.5 per cent respectively during the month. In spite of this, trade balance recorded surplus at RM9.87 billion, highest since April 2016,” the research team said.

Looking ahead, MIDF Research believed that Malaysia’s external trade performance would remain upbeat albeit moderating in the second half of the year due to favorable global market condition and modest recovery in commodity prices.

“In line with our estimate, exports will remain growing at solid pace this year. Synchronised economic performance in both major and emerging economies is a boost for trade.

“Gradual improvement and stability in commodities prices is another positive catalyst that will elevate Malaysia’s trade performance in 2017,” it said.