Sunday, September 20

Malaysia’s current account to remain in surplus for 2018

0

KUCHING: With Malaysia’s Balance of Payments recording a higher surplus of RM15 billion in current account for the first quarter of 2018 (1Q18), analysts are expecting the current account to remain in surplus for 2018.

According to the Department Of Statistics Malaysia, 1Q18 current account surplus of RM15 billion was up from a surplus of RM13.9 billion in 4Q17.

“The higher surplus of RM15 billion in current account was largely supported by increase in goods account of RM35.7 billion and lower deficit in services account of RM5.8 billion,” the department said in a press release.

“Meanwhile, financial account recorded a net inflow of RM15.2 billion.”

The research arm of Kenanga Investment Bank Bhd (Kenanga Research), in its Economic Viewpoint report, saw the recent moderation in global trade figures and deteriorating purchasing managers’ index (PMI) performance to trimming the merchandise trade account for the year.

“However, we expect imports growth to be capped as the government tightens its spending to improve its fiscal position,” Kenanga Research said.

“Therefore, we expect the current account to remain in a surplus, at two to 2.5 per cent of gross domestic product (GDP) for 2018.”

Meanwhile, on the back of heightened volatility from the trade war risks, expectations of US Federal Reserve’s rate hike and uncertainties from the domestic political reforms, the research arm expected limited fund flows to weigh in on the financial account.

RHB Research Institute Sdn Bhd (RHB Research) also maintained its expectation for the current account surplus to narrow slightly to RM39.3 billion, or 2.7 per cent of GDP in 2018.

“This is compared with three per cent of GDP in 2017, and is likely to be driven by higher deficits in the services, income and transfers accounts that offset a slightly larger merchandise surplus due to falling import growth,” the research firm said.