Malaysia’s exports to shrink as virus hits demand

Exports are forecast to grow by 0.6% YoY in 2020 after contracting by 1.7% in 2019, notes a research firm


MALAYSIAN manufacturing exports are likely to slump as businesses are reluctant to commit to orders in an uncertain environment caused by the Covid-19 pandemic.

As a result, exports are forecast to grow by 0.6% year-on-year (YoY) in 2020 after contracting by 1.7% in 2019, warns MIDF Amanah Investment Bank Bhd (MIDF Research).

The impact of Covid-19 has emerged as the top risk to global trade flows, with the Malaysia-China trade at risk of a slowdown as a result.

“Uncertainties to global trade flows will remain even when Covid-19 has been contained. This is due to the fact that existing tariffs imposed between China and the US are still largely in place regardless of the Phase 1 trade deal,” MIDF Research said in a report last week.

The research firm revealed several factors that will also affect Malaysia’s exports, including the upcoming US presidential election, Green Deal by the European Union, Saudi-Russia oil war and Malaysia-India spat.

As threat to foreign trade has increased even more with the pandemic spreading rapidly to Europe and the US, the Movement Control Order in Malaysia and many key countries will have a negative knock-on effect to export-import activities.

This is due to most businesses having to shut down temporarily and delay investment decisions, the firm added.

The Department of Statistics Malaysia (DoSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the country’s trade in February 2020 increased by 11.6% to RM136.3 billion compared to the same month in the previous year.

Exports expanded 11.8% to RM74.5 billion YoY. Meanwhile, re-exports were valued at RM9.8 billion which dropped 6.3% and accounted for 13.1% of total exports. However, domestic exports recorded an increase of 15.2% or RM8.5 billion to RM64.7 billion.

Imports rose RM6.3 billion (11.3%) to RM61.8 billion, resulting in a trade surplus of RM12.6 billion, 14.1% higher compared to February 2019, Mohd Uzir noted in a statement last week.

The DoSM stated that the growth in exports for the month was attributed to the expansion in exports to Singapore (RM2.1 billion), the US (RM1.6 billion), Republic of Korea (RM1.2 billion), China (RM935.4 million) and Taiwan (RM430.4 million).

Higher imports were mainly from the US (RM989.7 million), India (RM859.2 million), Taiwan (RM705.3 million), Republic of Korea (RM662.1 million) and China (RM591.9 million).

The DoSM added that the main products which contributed to the increase in exports were refined petroleum products (RM788.1 million), palm oil and palm oil-based products (RM692.7 million), timber and timber-based products (RM575.9 million), liquefied natural gas (RM222.2 million) and natural rubber (RM77.5 million).

Nonetheless, lower exports were recorded for electrical and electronics products (-RM707.9 million) and crude petroleum (-RM222.6 million).

The growth in imports by end-users was mainly attributed to intermediate goods (RM6.5 billion) and consumption goods (RM462.3 million), while imports for capital goods decreased RM1.1 billion, added DoSM.