RAM Ratings: Malaysia’s March exports to inch up 1.6pc

Malaysia’s exports for March 2018 will likely inch up 1.6 per cent. — AFP pic
Malaysia’s exports for March 2018 will likely inch up 1.6 per cent. — AFP pic

KUALA LUMPUR, May 3 — Malaysia’s exports for March 2018 will likely inch up 1.6 per cent, an improvement from the 2 per cent contraction recorded in the preceding month as external demand is likely to gradually gather pace after a temporary decline in February due to the Lunar New Year festivities.

Nonetheless, RAM Rating Services Bhd said any rebound would be moderated by reduced restocking demand amid some front-loading of shipments in January, along with a high base effect from the previous year.

“In line with still sluggish exports expected for the month, imports are anticipated to have contracted 4.9 per cent in March as demand for intermediate inputs is to remain weak, compounded by a high base effect from 2017,” it said in a statement today.

The ratings agency also projected trade surplus to come in at RM10.5 billion for the month.

Meanwhile, it said the proposed US tariff on Chinese technological goods could pose a direct risk to Malaysia’s trade momentum, given the importance of electrical & electronic (E&E) products to overall export share and the sector’s established position in the global value chain.

However, RAM Ratings said the composition of US imports from Malaysia and China, respectively, is different as Malaysia was more a source of intermediate parts and components while China’s shipments to the US constituted mostly finished goods.

“Accordingly, a larger volume of finished technological goods is likely to be produced onshore in the US, thus bypassing China. 

“The upside to Malaysia’s export resilience would be manifested in the form of intermediate goods demand coming directly from the US rather than through China which has thus far acted as a conduit and additionally, firms might decide to vertically integrate their processes in Malaysia, potentially increasing foreign investment and in turn boosting exports,” it added. — Bernama