By NG MIN SHEN / Pic By MUHD AMIN NAHARUL
Malaysia’s exports and imports are expected to display softer growth in the second half of 2018 (2H18), as escalating trade tensions are affecting global markets.
In a recent note, JF Apex Securities Bhd anticipates Malaysia’s exports and imports to grow 9.1% and 8.6% respectively in 2018, versus 18.9% and 19.9% respectively last year.
“We believe overall external trade will maintain its positive momentum albeit at a slower pace, driven by the manufacturing sector which is backed by strong global trade activities and meaningful recovery in commodity prices.
“However, we opine the prevailing trade war between the US and China could derail global trade, hence affecting our export performance.”
According to the Department of Statistics, Malaysia’s imports outgrew exports in June with a 14.9% year-on-year (YoY) growth to reach RM72.6 billion, while exports rose 7.6% YoY to RM78.7 billion.
AllianceDBS Research Sdn Bhd’s projection for 2018 export growth was more subdued at 5% to 6% YoY, although this was an upward revision from 4% previously.
In a recent report, the research firm said it is maintaining its 2018 gross domestic product (GDP) forecast for Malaysia at 5.6% YoY.
“We expect GDP growth for the second quarter of 2018 (2Q18) to register at 5.6%, supported by stronger private consumption due to the tax holiday period and resilient exports performance,” it said.
The country’s economy grew 5.4% in 1Q18, while exports climbed 8.4% in 2Q18 compared to a 6% growth in 1Q18.
AllianceDBS noted that the recent announced and anticipated US tariff of US$200 billion (RM816.43 billion) on China imports — covering almost all China imports to the US — and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade tensions.
Thus, Malaysia’s trade with the US contracted 6.8% YoY in June, with lower exports of electrical and electronics (E&E) products, as well as palm oil and palm-oil based products, while trade with Japan fell 2.3%.
However, this was somewhat offset by trade with China, which expanded 17.9% YoY, while trade with Asean grew 7.4% in June.
Exports to China stood at RM11.4 billion in June, up 16.9% YoY compared to a 7.4% growth in May, while exports to Hong Kong came in at RM6.1 billion in June, a 64.4% YoY spike versus a 34.8% growth in the previous month.
Imports from China came in at RM15.4 billion, up 18.8% YoY versus 7.8% in May, while imports from Singapore stood at RM8 billion, up 25.6% YoY from 13.5% previously.
JF Apex said the performance of both exports and imports marginally exceeded market expectations, mainly underpinned by better trade with key trading countries.
“However, on a monthly basis, export growth contracted 4.2% month-on-month (MoM) versus a 2.5% MoM decline in May 2018, while import growth slowed to 1.9% MoM versus a 4% MoM increase in May 2018,” it said.
As such, the nation’s trade surplus in June 2018 stood at RM6.05 billion, after depleting 38.9% YoY and 25.6% MoM. The trade balance was higher at RM8.12 billion in May 2018 and RM9.89 billion in June 2017.
On a half-yearly basis, export growth moderated to 7% in 1H18 from a 21% leap in 1H17, due to the higher base. Export growth in 1H18 was mainly supported by exports of manufactured goods and mining goods.
Import growth was also subdued at 3.4% in 1H18 compared 9.4% last year, due to contraction in all main components.
Manufacturing goods, which accounted for 86.1% of total exports, grew 12.7% in June this year versus a 3.2% increase in May — supported by higher exports of E&E pro- ducts (6.9% YoY versus 2.1% in May), petroleum products (33.9% YoY versus 1.7%), and chemicals and chemical products (31.6% YoY versus 14.6%).
However, exports of mining and agriculture goods were sluggish, with liquefied natural gas recording a 31.2% YoY decline after a 61% surge in May, and palm oil-based products slipping 26.8% YoY from a 24.7% slide in May.