Both exports and imports grew at a slower pace in December. Exports rose at the slowest pace in 14 months, by 4.7% y/y, while imports by 7.9% y/y, the lowest since mid-2017. Hence, trade surplus in December stood at RM7.3bil. While the slower exports were due to poor palm oil contribution and moderate growth in other export components, the drag on imports came from intermediate and consumption goods.

We remain optimistic on the 2018 outlook. Backed by stronger global growth which we project at 3.6% and added with 4.0% global export volume, these should lend support to exports positively. In particular, we noticed the health of the global manufacturing remains favourable, reflected by the PMI which is in the expansionary mode. This, together with firm commodity prices, will support export revenue. And with imports poised to stay healthy, we expect the overall GDP to expand by 5.5% in 2018 with exports set to grow around 9.5% partly affected the by base effect.

• Exports in December grew at the slowest pace in 14 months, by 4.7% y/y, from 14.5% y/y in November. The last time the economy registered a single-digit export growth was in June 2017. Like exports, we found imports rose at a slower pace by 7.9% y/y, the lowest since mid-2017. Hence, trade surplus in December stood at RM7.3bil.

• Imports in December were supported by capital goods, which grew strongly by 35.2% y/y, the fastest in 9 months on the back of strong import demand for parts of machinery and mechanical appliances. The drag came from intermediate imports, which fell by 0.7% y/y in December, the lowest since November 2016. Also, consumption imports dropped by 2.6% y/y in December.

• We notice a drop in the export growth of the major products in December. Palm oil exports fell by 8.6% y/y due to weak prices and tariff barriers imposed by India. Crude petroleum and manufactured goods exports slowed down due to base effect.

• We remain optimistic on the 2018 outlook. Backed by stronger global growth, which we project at 3.6% and added with 4.0% global export volume, these should lend support to exports positively. In particular, we notice the health of the global manufacturing remains favourable, reflected by the PMI which is in the expansionary mode. This, together with firm commodity prices, will support export revenue. And with imports poised to stay healthy, we expect the overall GDP to expand by 5.5% in 2018, with exports set to grow around 9.5% partly affected the by base effect.

Source: AmInvest Research - 8 Feb 2018