Analysts expect moderate exports growth for 2015

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KUCHING: Malaysia’s exports weakened sharply in April, in analysts’ view, as it slipped into a decline of 8.8 per cent year on year (y-o-y) in April, after a modest growth of 2.3 per cent in March and compared with minus 9.7 per cent in February as lower gas prices and weak global demand affected shipments.

According to RHB Research Institute Sdn Bhd (RHB Research), as a result, the shipments of electrical and electronic (E&E) products (35 per cent share of total exports) and non-E&E (49 per cent share) reversed into contractions in April, after expanding in the previous month while the exports of major commodity exports (16 per cent share) fell by a larger magnitude over the same period.

“Stripping out seasonal factors and measured on a three-month moving average basis, exports fell for a third consecutive month by a further 5.3 per cent y-o-y in April, from minus 2.5 per cent in March, suggesting that the underlying trend of external demand for the country’s exports had weakened,” the research house said.

In terms of markets, it noted that growth of exports to the US, European Union (EU) and China slowed in April, while shipments to Japan and Asean including Singapore fell by a larger magnitude during the month.

Nevertheless, RHB Research pointed out that notwithstanding headwinds and challenges, the global economy is envisaged to sustain its growth in 2015.

“This will likely provide some support to Malaysia’s exports, particularly the manufactured goods,” the research house said.

It expected the country’s real export to sustained at a growth of 4.2 per cent in 2015, albeit at a more moderate pace compared with 5.1 per cent in 2014.

In line with the drop in exports, RHB Research noted that total imports also slipped into a contraction of seven per cent y-o-y in April, after expanding by 5.8 per cent in March and 0.3 per cent in February.

“This was due to a sharp decline in the imports of capital goods of 16 per cent y-o-y in April, following an expansion of 15.5 per cent in March.

“This was made worse by a drop in the imports of intermediate goods of three per cent y-o-y in April, from 6.8 per cent in March, suggesting that the E&E exports will likely moderate going forward.

“These were, however, partly mitigated by a pick-up in the imports of consumption goods of 12.4 per cent y-o-y in April, from 0.42 per cent in March,” it said.

The research house further noted that as a whole, the drop in the imports of capital and intermediate goods suggests that external demand will likely be weak in the coming months.

It added that month-on-month (m-o-m), total imports also fell sharply by 8.8 per cent in April, after rising by 20.6 per cent in the previous month, mainly on account of falling imports of intermediate and consumption while shipments of capital goods slowed during the month.

As the drop in exports m-o-m exceeded the fall in that of imports, RHB Research noted that the trade surplus narrowed by 11.9 per cent to RM6.9 billion in April, from a surplus of RM7.8 billion in March.

“In the first four months of 2015, the trade surplus fell by 19.5 per cent y-o-y to RM28.2 billion, from RM35.1 billion in the corresponding period of 2014,” it said.

Going forward, the research house expected the current account surplus of the balance of payments to narrow significantly to RM26 billion or 2.3 per cent of gross domestic product (GDP) in 2015, compared with a surplus of RM49.5 billion or 4.6 per cent of GDP in 2014.