Exports and imports declined in Mar 2019 by -0.5% YoY (Feb 2019: -5.3% YoY) and -0.1% YoY (Feb 2019: -9.4% YoY) and in 1Q 2019 by -0.7% YoY (4Q 2018: +8.1% YoY) and -2.5% YoY (4Q 2018: +5.7% YoY). However, trade surplus widened to +MYR14.4b in Mar 2019 (Feb 2019: +MYR11.1b) and grew +10.7% YoY to +MYR36.9b in 1Q 2019 (4Q 2018: +27.5% YoY to +MYR34.8b), signaling continued but smaller positive net external demand growth contribution to 1Q 2109 GDP.

Slower demand growth in 1Q 2019

Net external demand remained accretive to 1Q 2019 GDP growth but by less as trade surplus up by a slower +10.7% YoY to +MYR36.9b (4Q 2018: +27.5% to +MYR34.8b). Domestic demand eased last quarter based on the sustained drop in imports of capital goods (1Q 2019: -9.8% YoY; 4Q 2018: -9.4% YoY) – a proxy of investment, and moderation in imports of consumption goods (1Q 2019: +1.1% YoY; 4Q 2018: +4.7% YoY) that adds to other consumer spending indicators pointing to slower real private consumption after last year’s consumption tax holiday-driven growth. 1Q 2019 GDP growth should therefore slow from +4.7% YoY in 4Q 2018.

Event-and assumption-driven trade outlook

1Q 2019 trade surplus of +MYR36.9b is 29% of our full-year forecast of +MYR127.7b based on the outlook of slower growth in this year’s exports (2019E: +4.0%; 2018: +6.8%) and imports (2019E: +3.7%; 2018: +4.9%). The projections are based on the moderation – not recession – in global economy; potential US-China trade deal this month to de-escalate and reduce global trade tension and uncertainties; prospect of better-than- expected crude oil ASP (2019E: USD65/bbl; 2019 YTD: USD65.2/bbl; 2018: USD71.2/bbl) and assumption of firmer CPO ASP (2019E: MYR2,350/tonne; 2019 YTD: MYR2,012/tonne; 2018: MYR2,235/tonne). Latest impetus to outlook includes China’s additional CPO purchases of 1.9m tonnes over a five-year period (2019-2023) and the resumptions of several previously under-review major infrastructure projects leading to imports recovery.

Source: Maybank Research - 25 Apr 2020