Malaysia’s diverse exports to withstand lockdown impact


MALAYSIA’S diverse export destinations and products should help the country to capitalise on the global trade rebound, supporting output, despite the extension of the national lockdown at least through the end of June, according to Moody’s Investors Service.

In its latest report, the global rating agency said the country has moved more into high value-added activities over the past few years, thus significantly reducing its dependence on commodities.

It added that the country’s exports of goods were worth 55% of GDP in 2020.

“Under the lockdown, the government has halted economic activities except in essential services and selected manufacturing sectors, including those that are key to exports.

“That is in addition to banning social activities, barring interstate travel, closing malls and limiting household movement,” it noted.

Moody’s said about 13% of the country’s population had received the first dose of the vaccine and the government had also announced relief measures worth RM40 billion, or about 3% of GDP, when the lockdown restrictions were implemented on June 1.

Thus, it expects Malaysia’s real GDP to continue to grow by more than 5% in 2021, assuming that the current level of restrictions allows the authorities to bring the rate of Covid-19 infection under control.

The World Bank yesterday revised down the country’s GDP projection to 4.5%, while S&P Global Ratings forecasted growth to be at 4.1%.

“The negative outlook reflects enduring pressures on Malaysia’s fiscal and debt settings, which have been further undermined by a worsening domestic Covid-19 situation this year,” S&P said in a statement on Tuesday.

Meanwhile, Moody’s also highlighted that a resurgence in Covid-19 cases along with low vaccination rates in Asia Pacific (APAC) pose renewed risks to domestic demand, although recovering global trade will support the region’s more export-oriented economies.

It said fresh movement restrictions to stem the spread of the virus will curb domestic demand and dampen consumer confidence.

It also emphasised that for an economy that is relatively dependent on domestic demand, the resurgence of infection would severely affect production activities.

“Meanwhile, vaccination rates are low in most parts of APAC, with only Maldives, Mongolia, Singapore and China having administered a first vaccine dose to at least 40% of their populations.”

It added that for an export-oriented economy, a large contribution from trade would offset weak domestic demand and increase output, as long as the shutdown of export-related factories, processing plants and sites due to Covid-19 is limited.