Logic Invest Research Blog

Author: loginvest   |   Latest post: Mon, 24 Feb 2020, 12:58 PM


Economic Focus - 2018 Exports Growth Moderated to 6.9%

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  • Exports and imports growth for December came in at 4.8% and 1.0%, respectively, with 2018 exports and imports growing by 6.9% and 5.1%
  • December trade surplus stood at RM10.4bn, with 2018 average trade balance in a surplus of RM10bn
  • We forecast 2019 full-year export growth at around 3.0%-4.0% and GDP growth at 4.5% in 2019


In December, Malaysia’s exports growth accelerated to 4.8% y-o-y (November: +1.6%), while imports grew by 1.0% y-o-y (November: +4.7%). As a result, trade surplus expanded to RM10.4bn (November: RM7.4bn), an increase of RM3.1bn compared to the preceding year.

During the month, the y-o-y exports growth was led by expansion in crude petroleum (+17.5%) and E&E products (+14.2%). However, growth was offset by the exports contraction of palm oil and palm oil-based products (-24.4%), refined petroleum products (-5.3%) and LNG (-2.7%).

On the other hand, the y-o-y imports growth was attributed to an increase in intermediate goods (+3.1%) and consumption goods (+5.7%) while capital goods declined 21.7% y-o-y in December.

For full-year 2018, exports and imports grew 6.9% y-o-y (2017: +19.3%) and 5.1% y-o-y (2017: +20.2%), respectively, with the average trade balance in a surplus of RM10bn.

Our comments

In December, export growth came in above Bloomberg consensus estimate of 1.3% y-o-y. The full-year 2018 exports growth of 6.7% came in slightly above our estimated growth range of 5.5% to 6.0% y-o-y.

On a seasonally adjusted (SA) m-o-m basis, exports contracted by 2.2% (November: -12.8%). The contraction in exports was mainly attributed to the decline in refined petroleum products (- 33.1%), palm oil and palm oil-based products (-22.4%) and refined LNG (-9.7%), which offset the increase in E&E manufactured goods (+5.2%) and crude petroleum (+11.2%).

Furthermore, Malaysia’s trade with its major trading partners contracted with lower exports of goods. Exports to Singapore and China contracted 9.4% m-o-m (December: RM11.9bn, November: RM13.1bn) and 1.5% m-o-m (December: RM11.5bn, November: RM11.6bn) respectively. Meanwhile, exports to the US and Japan increased by 7.2% and 2.8% m-o-m, respectively, partially offsetting the contraction.

On the other hand, imports contracted by 8.6% SA m-o-m (November: +0.9%) to RM70.5bn during the same month, partly due to a contraction in the imports of all types of goods: capital (- 7.5%), intermediate (-1.7%) and consumption goods (-0.8%). Given that the government has already tightened its public spending and is focusing on reducing its fiscal deficit and national debt level, the cancellation/postponing of infrastructure projects has begun to weigh on the imports of capital goods.

According to the Minister of International Trade and Industry (MITI) Datuk Darell Leiking, ongoing negotiations on the Regional Comprehensive Economic Partnership (RCEP) trade agreement will likely be concluded by end-2019. Once it is approved by all parties, we expect this agreement to act as a catalyst for Malaysia’s exports growth in the coming years.

We remain cautiously optimistic on Malaysia’s exports growth in the near term, and hence we expect 2019 full-year exports growth to come in between 3.0% to 4.0% y-o-y. We also reiterate our 2018 and 2019 GDP growth forecasts of +4.6% y-o-y and +4.5% y-o-y respectively (2017: +5.9%).

Source: Alliance Research - 31 Jan 2019

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