KUCHING: Business and trade activities are expected to pick up despite the slowdown in total trade and weaker exports performance in July 2021.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) recapped that Malaysia’s total trade grew at slower pace of 13 per cent year on year (y-o-y) in July 2021, attributable mainly to weaker exports.
“The weak exports and further rise in monthly imports, up 0.5 per cent month on month (m-o-m), resulted in smaller trade surplus of RM13.7 billion,” MIDF Research said.
“Compared to July last year, exports moderated sharply to five per cent y-o-y faster than our expectation as we anticipated the impact of the temporary closure of factories during the month would have a significant impact to exports performance.
“While there was a slowdown in exports to major trading partners especially to China and the US, but thanks to Malaysia’s diversified export products the single-digit growth in exports was supported mainly by increased exports of petroleum products, chemicals and chemical products, and palm-oil products.”
The research arm gathered that imports, on the other hand, maintained double-digit growth albeit softer at 24 per cent y-o-y, adding that the moderation in growth was mainly due to the waning base effect.
Looking ahead, MIDF Research maintained forecast for exports and imports to grow at 13.5 per cent y-o-y and 12.7 per cent y-o-y, respectively.
“Despite the slowdown in total trade and weaker exports performance in July 2021, we expect the momentum of business and trade activity to pick up following relaxation of restrictions and reopening of business activities since mid-July 2021.
“Recent information also indicates factories are allowed to increase their capacity utilisation closer to full capacity especially when all workers have been fully vaccinated.”
According to MIDF Research, the reopening and resumption of factory production activities will allow exports of electrical and electronics (E&E) products to be ramped up again to meet with the strong global demand.
“Nevertheless the concern about the slowdown in China and other economies due to the recent spike in Covid-19 cases may affect the strength of exports in the coming months.
“To a certain extent, tighter restrictions to contain the pandemic such as the closure of a major port in China may adversely affect the global trade activity particularly in August 2021.”
The research arm also noted that the fading base effect will also result in a more normalised exports and imports growth in the latter part of the year.
“On balance, we maintain our forecast for exports to grow at 13.5 per cent y-o-y and imports to expand by 12.7 per cent y-o-y this year, anticipating that international trade activity will recover and increase further in the months to come.”