Global trade picks up, M’sia’s exports to strengthen in 2017
Given the improvement in the outlook of the commodity sector and a recovery in global trade activity, we expect trade surplus to grow at a sustained pace heading into 2017. RHB Research
KUCHING: Analysts believe that the global trade is finally picking up again as indicated by the strong recovery in exports across the Asian region for the last couple of months.
RHB Research Sdn Bhd (RHB Research) highlighted this in a recent report, and said it expected Malaysia’s exports growth to recover by a more robust pace of six per cent for 2017, as compared to 1.1 per cent in 2016.
It explained that some of the drivers to stronger exports numbers this year include a recovery in demand for commodity products, aided by higher prices, a pick-up in global semiconductor sales in late 2016, translating into higher electrical and electronics (E&E) exports, and an improving global trade outlook on the back of stronger global growth prospects.
The research team also expected the current account in the balance of payments to widen to RM33.7 billion or 2.6 per cent of gross domestic product (GDP) in 2017, from RM25.1 billion or two per cent of GDP in 2016, on account of higher trade surplus.
“Given the improvement in the outlook of the commodity sector and a recovery in global trade activity, we expect trade surplus to grow at a sustained pace heading into 2017.
“This would likely contribute to a larger surplus in the current account in the balance of payments,” it commented.
Meanwhile, RHB Research also pointed out that Malaysia’s exports growth in February was the strongest recorded in almost seven years.
“Exports gained pace to 26.5 per cent year-on-year (y-o-y) in February, its quickest pace since March 2010, from 13.6 per cent in January and compared with 10.7 per cent in December.
“The acceleration in February’s figure was for the fourth straight month; it was partly on account of a recovery in global demand and also due to a low base effect aside from some delayed shipments into February 2017 given a long holiday break in late January,” it explained, noting that a weaker currency also supported exports growth.
Stripping out the currency factor and measured in US dollar terms, the research team pointed out that exports accelerated to 19.1 per cent y-o-y during the month, its largest monthly increase in more than five years, from 10.8 per cent in January and compared to 6.2 per cent in December.
“We expect exports growth to normalise in subsequent months,” it opined.