RAM ratings expects Malaysia’s may trade growth to accelerate

Despite US-China tariff tussles, Malaysia looks set to continue its trade growth in the coming months. — Reuters pic
Despite US-China tariff tussles, Malaysia looks set to continue its trade growth in the coming months. — Reuters pic

KUALA LUMPUR, July 3 — RAM Ratings expects Malaysia’s trade growth to have increased its momentum in May 2019, despite the escalated import tariffs between the United States (US) and China that same month.

The ratings agency said the healthier estimated export growth of 4.0 per cent in May from 1.1 per cent recorded in April was partly attributable to the frontloading of shipments ahead of the Hari Raya festive holidays in June.

Import growth was also estimated to rise to 6.8 per cent during the month from 4.4 per cent in April, primarily due to low-base effects amid slower imports.

“Overall, Malaysia’s trade surplus is projected to come in at RM6.3 billion in May,” RAM Ratings said in a statement today.

Meanwhile, it said the much-awaited meeting between the US President Donald Trump and China’s President Xi Jinping at the G20 Summit last week had led to a truce, thereby facilitating the resumption of trade negotiations.

Although the details of the truce have not been fully defined, a pause in the imposition of tariffs on the final group of Chinese imports into the US and a review of the ban on Huawei are on the cards.

“However, uncertainties are set to continue given the lack of concrete details on the timeline for the latest round of negotiations, the question of what Huawei-related restrictions will be eased, and the immediate steps China has to take to stave off tariff increases.

“As such, the observable trade-diversion effects to date, in the form of diverted trade flows and FDI flows, may even become more pronounced as this situation persists,” said RAM Rating’s head of research, Kristina Fong.

Fong said while the resumption of trade talks was a welcomed development, the dispute had already disrupted global trade patterns as firms sought for alternative sources for imports.

However, the import disruptions experienced by the US and China yielded trade-diversion opportunities for major Asian economies.

The regional supply chain had benefited the most from stronger American demand, with Vietnam being the biggest beneficiary.

“Malaysia also gained from the trade diversion, as the country’s diversified exports masked some trade-diversion benefits,” it said.

The nation chalked up gains in exports to both economic giants in terms of goods affected by their import tariffs, particularly exports of miscellaneous manufactured products to the US and mineral fuel to China, it added. — Bernama

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