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Prakash Sakpal, economist at ING, notes that Malaysia’s export growth not only remained in positive territory for a second consecutive month in May, but it was also better than consensus.

Key Quotes

“Reported in local currency (Malaysian ringgit, or MYR) terms exports grew by 2.5% year-on-year in May, surpassing the consensus median of 2.2% growth and up from 1.1% growth in April.”

“Electronics and electrical exports with a 38% weight in total exports, remained a key growth driver despite some slowdown in their rate of growth to 0.5% in May from 3.9% in April. This still represents a significant outperformance in the face of the ongoing electronics export weakness observed elsewhere in the region reflecting the global tech slump.”

“Imports also grew in May albeit at less than half the pace (1.4%) of the 3.2% consensus estimate. The trade surplus narrowed to MYR 9.1bn from MYR 10.9bn in April. This puts the year-to-date surplus at MYR 56.8 billion, which is MYR 2.3bn more than in the same period of 2018.”

“Based on this trade and also manufacturing data, we believe the second quarter has shaped up to deliver a better quarter for GDP growth than the first.”

“While we continue to believe that Malaysia’s GDP growth touched the cycle low at 4.5%YoY in 1Q19, we consider our 4.6% YoY growth forecast for 2Q at risk of more upside than downside surprise. We also believe that Malaysia’s central bank (Bank Negara Malaysia – BNM) will assess economic risks as fairly balanced between growth and inflation and leave the overnight policy rate unchanged at 3.0% at the meeting next week (9 July).”