News Room - Business/Economics

Posted on 04 Jun 2010

Strong external trade growth seen for April

Economists project exports to rise by 38% and imports 30%

The torrid pace of external trade growth is expected to continue in April with consensus economists’ projection of exports to surge by 38% and imports by 30%.

Such strong external trade growth, due in some large part to a low base effect, is also reflective of robust economic activity in the country’s main export destinations such as the United States and China.

The external trade data will be released by the Statistics Department today.

“Asian PMI (purchasing manager’s index) is still strong and the strong intra- and inter-regional trade should support Malaysia’s numbers,’’ said AmResearch senior economist Manokaran Mottain.

[PICTURE1]

External trade has been strong since the start of the year thanks in part to the rebound in global economic growth.

Growth in trade in the first quarter helped propel gross domestic product to 10.1% – the largest since 2000 – and with exports and imports remaining strong to kick off the second quarter, expectations will be that economic growth in the quarter too would remain lofty.

TA Research economist Patricia Oh, who had the most bullish export growth projection for April among those polled, said her estimate was based on the jump in book-to-bill ratio for semiconductor equipment.

The American book-to-bill ratio for April 2010 of 1.13 was 8.1% higher than March and was nearly 500% higher than the number in April 2009.

With electrical and electronics leading the surge in exports, a high book-to-bill ratio could imply the sector would continue to see strong demand and growth in April.

Affin Securities economist Alan Tan, who is projecting an export growth of 35% in April, said the re-stocking of inventories globally would continue to boost in exports.

He, however, said the slowdown in leading indicators, especially the United States, is casting some doubt over the sustainability of strong economic growth seen so far this year.

He expects growth would slow down in the second half of the year but would, nonetheless, remain solid.

“The risk is 2011. The global economy will remain healthy in 2010,’’ he said.

Should growth slow down in the second half, it would signal a return to normalcy instead of the extraordinary levels seen now.

One event economists are keeping an eye on is the ongoing troubles in Europe. At the moment, they are comfortable that it would not dent Malaysian export growth.

Oh said the EU region accounts for 11% of Malaysian exports and the affected countries just 0.5% of exports “Malaysia is underexposed to the crisis in Europe but we must not ignore the impact if the crisis is prolonged,’’ she added.