Malaysia

Additional RM150bil stimulus measures

• PM Tan Sri Muhyiddin Yassin has announced the Pemulih package worth an additional RM150bil of government assistance and stimulus in total to support the economy. This package accounts for 9.9% of GDP. With this package, the total stimulus announced since 2020 amounted to RM530bil or 27% of GDP

• The latest package shows a direct injection of RM10bil, bringing the total direct fiscal injection to RM83bil or 6% of GDP. Table 2 presents our scenario based computation on the fiscal deficit % GDP projection in 2021.

• The balance RM140bil are from non-indirect measures comprising largely of the blanket loan moratorium for individuals who opt for it. The blanket loan moratorium should take into account RM100bil if all individual loan borrowers opt for it. The remaining RM40bil comes from other non-fiscal measures. Details are presented in Table 3 below.

• These additional measures should help keep the economic momentum, allowing the country to grow between 4.0% and 4.5% (our projection).

• And with the additional RM10bil fiscal injection, the current bond issuance of RM160bil is expected to increase to RM160bil–RM165bil

Malaysia

Lockdown poses challenges to exports

Exports rose 47.3% y/y in May (63.0% y/y in April) while imports surpassed exports; growth for the first time since April 2020, expanding 50.3% y/y (24.4% y/y in April). The trade surplus in May narrowed to RM13.7bil (US$3.30bil) from RM20.5bil in April.

The outlook for trade activities in the months of June and July will be impacted by the current lockdown that disrupted supply chains from the classification of essential and non-essential goods and services, and permitting export-oriented industries to operate at 60% capacity.

The outlook post-July will depend on how well the Covid-19 pandemic is being managed, speed of the vaccination programme, how quickly the economy opens up and also on the standard operating procedures (SOPs).

Any delay in opening up will present risk of big boys moving their operations to parent companies or elsewhere as uncertainty increases. It may also dampen the foreign investors’ appetite here.

If all goes according to the four-phase National Recovery Plan (NRP), then exports are expected to recover in 4Q21. Our export projection for the full year is 15% from -1.4% in 2020.

A. Highlights

• Exports rose 47.3% y/y in May (63.0%y/y in April), the fourth straight month of double-digit growth. This brings the first five-month average to 33.1%

• May's export growth was driven mainly by robust demand for electrical and electronic shipments (34.3% y/y), rubber goods (133.2% y/y) and petroleum products (75.1% y/y).

• Imports in May grew 50.3% y/y from 24.4% y/y in April. It surpassed exports’ growth for the first time since April 2020. Intermediate imports rose 52.4% y/y; capital goods were up 34% y/y and consumption increased by 37.8% y/y.

• Higher imports were noted for electrical and electronic products (25.3% y/y); petroleum products (169.7% y/y); chemical and chemical products (53.1% y/y); manufacture of metal (52.7% y/y); and transport equipment (74.5% y/y).

• The trade surplus in May narrowed to RM13.7bil (US$3.30bil) from RM20.5bil in April. This brings the first five months’ trade surplus to RM92.8bil.

B. Key Takeaways

• Uncertainty in the domestic environment saw exports, imports and trade surplus falling by 12.6%, 7.8%, and 32.5% month-on-month, respectively.

• The outlook for trade activities in the months of June and July is expected to be challenging due to the lockdown. It has disrupted supply chains from the classification of essential and non-essential goods and services where there are interlinkages. Also export-oriented industries are allowed to operate at 60% capacity.

• The potential outlook post-July will depend on how well the Covid-19 pandemic is being managed. Besides, it also depends on the speed of the vaccination programme, how quickly the economy opens up and also on the standard operating procedures (SOPs).

• Any delay in opening up will present risk of big boys moving their operations to parent companies or elsewhere as greater increases. It may also dampen the foreign investors’ appetite here.

• If all goes according to the four-phase National Recovery Plan (NRP), then exports are expected to recover in 4Q21. And the upswing in global semiconductors will continue to benefit our E&E segment. Also, rubber and chemical-related products will provide the necessary uplift. Our export projection for the full year is 15% from -1.4% in 2020.

Source: AmInvest Research - 29 Jun 2021