Subdued trade performance expected in 2020

Malaysia’s export activity could decline by 7.5% in 2020 due to the anticipated dampened manufacturing sector

By SHAHEERA AZNAM SHAH / Pic By ARIF KARTONO

THE impact of Covid-19 is expected to take a toll on Malaysia’s trade performance this year due to disruptions in global supply following the containment measures and strict quarantines, said analysts.

Affin Hwang Capital estimated that the country’s export activity could decline by 7.5% in 2020 due to the anticipated dampened manufacturing sector, while the gross import could contract by 8%.

“Looking ahead, we believe external demand will continue to remain weak and dampen the manufacturing sector, especially the export-oriented.

“Malaysia’s manufacturing Purchasing Managers’ Index fell to a record survey low of 31.3 in April from 48.4 in March.

“The enforcement of the Movement Control Order (MCO) from March 18, 2020, has led to companies and manufacturers operating below full capacity, resulting in material shortages for some producers, which we believe will continue to disrupt production and exports for the domestic and global markets,” it said in a report yesterday.

The research house added that Malaysia’s external demand is expected to be weighed down by weak exports to China and the US, which accounted for 13.7% and 9.2% of the country’s total exports respectively.

“Weak global growth and prolonged global supply chain disruptions amid containment measures in major countries will also dampen Malaysia’s trade performance.

“The intra-regional trade will be impacted by the possibility of extended lockdowns and quarantine rules of Asean countries. The demand for Malaysia’s electrical and electronics (E&E) exports will remain sluggish due to the supply disruptions,” it said.

PublicInvest Research said as Malaysia is adapting to a new norm, the productivity and output of businesses is likely to be affected.

“Businesses will resume operations in early May following a long period of closure and it is unlikely to be in full capacity however, given that businesses have to adjust to a new normal which entails a strict standard operating procedure involving social distancing.

“This may inevitably affect productivity and output, while the lengthy closure of ports in Asean will also impact trade in the near term,” it said.

On Monday, official data stated that the country’s total trade in March fell 3.8% year-on-year (YoY) to RM147.9 billion, dragged by weaker exports of E&E and commodity products.

The country’s exports and imports declined 4.7% YoY to RM80.1 billion and 2.7% YoY to RM67.8 billion respectively.

The decline in export was attributed to the sharp drop in demand for manufactured goods, which accounted for 84.4% of total exports, mining goods and agriculture goods during the month.

For imports, the capital goods were almost halved in March due to the decline in the delivery of transport equipment, particularly for aircraft and parts, which reflected a slowdown in the investment activity during the month.