Covid-19 spectre to continue hovering over February exports

PETALING JAYA: February trade performance will continue to be weighed down by the fallout from the Covid-19 outbreak, as that is when the full impact is likely to be recognised, a note from CGS CIMB Research said.

The research house also opined that concerns over political uncertainty and policy continuity may weigh on consumption and investment appetite, further dampening the growth outlook in 2020.

“We share the central bank’s prognosis of a gradual recovery in 2H20, as the outbreak subsides and economic activity normalises, which in our view may not necessitate further policy support,” it said.

BNM delivered its second consecutive 25 basis point rate cut in the Overnight Policy Rate (OPR) to 2.5% on Tuesday, alongside a RM20 billion economic stimulus package, which the government expects to support GDP growth for 2020 at 3.2-4.2%.

CGS CIMB said it is retaining its year-end OPR forecast of 2.5%, implying no further policy rate changes this year.

For January, exports and imports slipped 1.5% and 2.4% year on year (yoy), leading to a wider trade surplus of RM12 billion.

Exports value stood at RM84.1 billion in January 2020 against RM85.4 billion in the same month a year ago, while imports declined to RM72.1 billion.

PublicInvest Research said full export recovery could take time, even though the global PMI has remained above 50 in January.

“Recovery is likely to be fragile given that the outbreak has now reached over 50 countries affecting over 80,000 people and disrupting global production and consumptions. Investment decisions may correspondingly be delayed, chipping away some momentum in trade,” it said.

The research house also noted that while support for consumption and investment activities are underway, the impact may take a while to filter through into the system.

Meanwhile, Affin Hwang Capital Research said Malaysia’s trade performance could get a boost from potential rebound in global semiconductor sales in the coming months.

The research house expects export growth to improve to 1.5% in 2020, with import growth of 2.5%.

“With import growth higher than export, we expect the trade balance to narrow slightly but remain large at around RM131 billion projected for 2020,” it said.