KUALA LUMPUR: Malaysia’s exports in 2019 contracted 1.7% to RM986.4 billion, the first decline since 2009, raising concerns over the country’s trade performance this year amid the Wuhan coronavirus outbreak.
“There were some early signs of recovery for Malaysia’s exports prior to the novel coronavirus (2019-nCoV) outbreak. However, there is now uncertainty over the extent the outbreak will affect manufacturing supply chains in the region.
“Malaysia’s import dependence on China is relatively high for manufactured goods and transport equipment. There are also risks that the 2019-nCoV outbreak may derail China’s ability to fulfil the Phase One trade deal which is supposed to take effect in mid-February, while a global tech down cycle could drag beyond mid 2020,” said UOB Research in a note today.
The research house said it remains cautious and maintains 2020 full-year export growth forecast at 2.0% for now.
MIDF Research forecasts export growth to recover slightly at 1.5% with the corona-virus outbreak to be another potential risk factor.
“Besides that, continuous decline in imports of capital and intermediate goods in 2019 indicate weak prospects for exports in 2020. Nevertheless, we opine that commodity-based sectors particularly LNG exports to contribute to a better growth in exports especially with PFLNG 2 expected to be operational in 2020.”
Total trade for 2019 was down 2.5% to RM1.84 trillion, in tandem with softer global demand amid trade tensions and unfavourable external economic conditions. Imports declined 3.5% to RM849.01 billion.
However, Deputy International Trade and Industry Minister Ong Kian Ming (pix) said the country is targeting to achieve RM2 trillion in total trade this year.
“We were not able to achieve that (growth in total trade) last year but perhaps with improving global situation and the improvement in CPO prices and oil prices, RM2 trillion will be a good target to aim for,” he told a press conference after announcing Malaysia’s trade performance for 2019 here today.
In 2019, Malaysia’s trade surplus continued to register double-digit growth for three consecutive years, widening by 11% to RM137.39 billion compared to RM123.78 billion in 2018. This was the largest trade surplus since 2009, marking a 22nd consecutive year of trade surplus.
Lower trade was recorded with Singapore, Hong Kong, France, Thailand and Japan, but China remained as Malaysia’s largest trading partner for 11 consecutive years and accounted for 17.2% of Malaysia’s total trade in 2019. Trade with China is valued at RM315.19 billion.
Exports to China amounted to RM139.61 billion in 2019, constituting 14.2% of total exports. China surpassed Singapore as Malaysia’s largest export destination after being the second largest export destination since 2012.
“Even though China has surpassed Singapore as our largest export destination, the overall figure is still less than 20%. There’s no one market that represents more than 20% of our export. It still shows that we’ve a relatively diversified trading relationship with our trading partners,” said Ong.
He said the uncertainties in China, stemming from the coronavirus, will make Chinese and multinational companies think about their risk diversi-fication strategy.
“Malaysia, within Asean, can be beneficiary of this risk diversification of not wanting to put all your eggs in one basket in terms of your manufacturing output. This is something that would be part and parcel of how we want to position ourselves,” said Ong.
China also remained as Malaysia’s largest import source, accounting for 20.7% share of total imports in 2019.