News Room - Business/Economics

Posted on 07 May 2009

Downtrend in exports to decelerate by H2 (Malaysia)

The country’s exports will continue to contract but the pace of decline is expected to narrow by the second half of this year, say economists.

 

CIMB Investment Bank Bhd economic research head Lee Heng Guie expects both export and import figures to contract as external demand continues to remain sluggish.

 

Lee said although some electronic companies had reported month-on-month increase in orders and port operators had registered improvement in container volumes following increased trade, the indications were not strong enough to denote recovery in Malaysia’s trade figures.

 

“We expect trade figures to continue their downtrend but the pace of decline narrowing by the second half of this year,” he told StarBiz.

 

The Statistics Department is set to release the preliminary figures for March’s external trade tomorrow.

 

In February, Malaysia’s exports declined 15.9% to RM39.6bil while imports also fell by 27.3% to RM27.6bil year-on-year.

 

Compared with January 2009, exports rose 3.4% from RM38.3bil and imports slid 8.4% from RM30.2bil. Concurrently, Malaysia’s external trade surplus grew 30.6% to RM12bil in February compared with RM9.2bil in the same month of 2008.

 

Kenanga Investment Research economist Wan Suhaimi Saidi said March’s export figures could even increase month-on-month due to seasonal inventory build-up. “Demand for intermediate and finished goods is observed to be high in March,” he added.

 

Wan Suhaimi expects recovery in the second half of this year largely due to the low base effect in the middle of last year when export figures plunged due to the global slowdown.

 

Meanwhile, AmResearch Sdn Bhd senior economist Manokaran Mottain expects to see double-digit contraction in the March trade figures.

 

“Looking at the trade data, manufacturers are still not importing because they believe that demand is not going to recover so soon,” he said. Manokaran said the key factor to growth remained in the recovery in final demand among Malaysia’s major trading partners such as the United States, European Union and Japan.

 

Manokaran said although China’s Purchasing Manager’s Index showed an expansion in March, it did not mean that Malaysia’s manufacturing sector would get a substantial boost, as exports to China constituted less than 10% of total exports.

 

“It would continue to contract until September when we can see some positive growth,” he said.

 

Wan Suhaimi attributed the decline in trade figures to the high unemployment rate in the US, which still weighs heavily on regional exports.