Malaysia's July exports surge 30.9% year on year, beat forecasts

PETALING JAYA: Malaysia’s exports are expected to have moderated in August following a strong growth of 30.9% year-on-year (yoy) to RM78.6 billion in July. However, export growth for 2017 is still expected to be positive, with economists projecting growth of up to 15% yoy.

IHS Markit Asia Pacific chief economist Rajiv Biswas said although export growth in July had been expected to be strong, the outturn of 30.9% yoy growth exceeded expectations, reflecting soaring exports of electrical and electronic (E&E) products as well as the strong economic growth momentum in many key export markets, including China, Japan, Asean and the eurozone.

“Due to the very rapid pace of export growth in recent months, some moderation in export growth momentum is expected in August after the red-hot pace of export growth yoy during June and July,” he told SunBiz, adding that with the strength of export growth during the first seven months of 2017, export growth for this year is still expected to be very robust, projecting a growth of 15% yoy in ringgit terms. 

“The outlook for Malaysia’s electronics sector remains favourable for the remainder of 2017, with the IHS Markit Global Electronics PMI for July at a level of 55.7, still indicating strong global electronics output and new orders in coming months,” Rajiv added.

MIDF Research maintained its 2017 exports growth forecast at 14.5%. Looking ahead, it foresees Malaysia’s external trade outlook for August to continue on the upward trend.

Among others, economic developments in major economies namely the US, the EU and China are displaying positive signs. Encouraging developments in the US and China will have indirect positive spillover on Malaysia’s products. Regionally, South Korea and Vietnam exports expanded by double digits in August 2017 – 17.4% yoy and 13.1% yoy respectively.

“Henceforth, we opine global trade activities will continue expanding and this indicate promising cue for Malaysia’s external trade performance in August. Even though export growth in July skyrocketed to above 30% yoy, we maintain our view that Malaysia’s exports to moderate in the second half of 2017 due to high base effect,” said MIDF.

In spite of this, the research house said, continuous strengthening global demand and modest recovery in commodity price will support Malaysia’s trade performance this year, but noted that protectionist threat, geopolitical tension and policy uncertainties in developed countries remains headwinds for global trade in the near term.

It said the rebound in exports and imports growth in July was expected due to the low-base effect.

For three consecutive months, exports outpaced imports and bring trade balance surplus to RM8 bilion in July 2017. Total trade stood at RM149.2 billion, a RM31.2 billion or 26.4% increase compared with the same month last year.

Meanwhile, MIDF Research pointed out that there are moderating signs in commodity-based exports products. “Slowdown in price recovery and growth imposed significant pressure for the commodity-based exports to maintain growth momentum,” it added.