Malaysia: Exports expected to expand 2.0% in 2020 – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting gave their opinion on the performance of Malaysian export/import sectors.

Key Quotes

“Gross exports unexpectedly rebounded by 2.7% y/y in Dec (Nov: -5.5% y/y), against our and market expectations of a decline by 2.0% and 2.5% respectively. The turnaround in Dec exports was mainly due to increases in commodity-based exports such as refined petroleum, palm oil and rubber products amid a smaller decline in E&E products. However, for the full year, exports contracted for the first time since 2009 by 1.7% in 2019.”

“Similarly, gross imports also posted the first yearly contraction since 2009 by 3.5% in 2019 (2018: +5.2%), despite recovering mildly by 0.9% y/y in Dec (Nov: -3.6% y/y). Given the steeper drop in imports over exports, the trade surplus widened to MYR137.4bn in 2019 (2018: +MYR123.8bn), with 4Q19 alone clinching MYR36.5bn of trade surplus (3Q19: +MYR33.5bn). We expect the current account to register a wider surplus of MYR14.0bn in 4Q19 (vs. MYR11.5bn in 3Q19).”

“There were some early signs of recovery for Malaysia’s exports prior to the novel coronavirus (2019-nCoV) outbreak. However, there is now uncertainty what is the extent the outbreak will affect manufacturing supply chains in the region. Malaysia’s import dependence on China is relatively high for manufactured goods and transport equipment. There are also risks that the 2019-nCoV outbreak may derail China’s ability to fulfil the Phase One trade deal which is supposed to take effect in mid-Feb, while a global tech down cycle could drag beyond mid2020. We remain cautious and maintain our 2020 full-year export growth forecast at 2.0% for now.”