Current account surplus to shrink to 2-3 pct in 2019

KUALA LUMPUR: Malaysia’s current account is expected to remain in surplus in 2019, albeit narrowing to between two per cent and three per cent of Gross National Income compared with the estimated current account surplus of between 2.5 per cent and three per cent in 2018.

The slightly lower expectation of next year’s current account surplus was attributed to the lower goods surplus as well as widening services and income deficits, the Ministry of Finance said in the Economic Outlook 2019.

“The goods surplus is expected to narrow to RM128.2 billion as import growth is anticipated to outpace exports, following continued demand for capital and intermediate goods,” the ministry said, adding the services account deficit is expected to widen to RM33.1 billion following continued reliance on foreign transport as well as technical and trade-related services.

Meanwhile, the government has forecast that the surplus in the travel account is expected to be higher at RM28.2 billion, driven by continued tourist arrivals and per capita spending which more than offset residents’ spending abroad for leisure, business and pilgrimage.

The primary income account is anticipated to register a higher deficit at RM41.4 billion, mainly due to higher profits expected by locally incorporated multinational companies together with a larger net outflow of compensation to foreign professional skills and expertise.

As for 2018, the government has forecast that the deficit in the primary income account is expected to widen to RM40.9 billion following higher repatriation of profits and dividends by foreign investors in Malaysia.

Investment income accruing to foreign investors is expected to increase 4.3 per cent to RM81.3 billion, most of which are in the manufacturing and mining sectors, finance and insurance, as well as wholesale and retail subsectors. The ministry said the repatriation of investment income accruing to Malaysian companies investing abroad, particularly in the mining and services sector, are expected to record RM46.9 billion.

The secondary income account is projected to record wider net outflows of RM20 billion following the remittances by foreign workers, which are expected to remain substantial, reinforced by the upward revision of minimum wage.

“For the current year under review, net outflows in the secondary income account are expected to be larger at RM19.2 billion due to higher remittances by foreign workers to Bangladesh, India, Indonesia, Myanmar and Nepal,” it added.

Gross outflows, primarily remittances by foreign workers are expected to increase 4.8 per cent to RM35.7 billion in line with higher requirement for labour in manufacturing, construction and plantation sectors.