Malaysia’s trade to shrink for another month in July, says RAM ratings

File picture shows a worker inspecting a container at North Port in Port Klang outside Kuala Lumpur, January 8, 2009. — Reuters pic
File picture shows a worker inspecting a container at North Port in Port Klang outside Kuala Lumpur, January 8, 2009. — Reuters pic

KUALA LUMPUR, Sept 3 — RAM Rating Services Bhd (RAM Ratings) expects Malaysia’s trade to contract for the second consecutive month in July.

It said exports and imports were expected to fall by 1.8 per cent and 1.1 per cent, respectively, resulting in a narrower overall trade surplus of RM7.7 billion for the month.

“The continued contraction estimated for July is consistent with subdued global demand amid heightened uncertainties. This is not entirely surprising, given ongoing tensions between Japan and South Korea and escalating US-China tit-for-tat tariffs,” the rating firm said in a statement today.

Malaysia’s trade in June shrank by six per cent from the same month of 2018, with exports down by 3.1 per cent and imports lower by 9.2 per cent.

RAM Ratings said the rapid escalation of both the rates and scope of tariffs by both the United States and China in the past two months, covering almost all bilateral trade between the two countries, was likely to aggravate the already sluggish global trade momentum.

Tariffs imposed by the US would affect 96.9 per cent of total imports from China while China’s tariffs would cover 68.1 per cent of total US imports, it said.

“While slow global demand had significantly dampened the regional export growth momentum, Malaysia is seen as among the least affected, having experienced a marginal decline of 0.2 per cent in the first half (H1) of 2019 vis-a-vis the sharp contraction charted by other economies in the region,” it said.

Most notably, Indonesia and South Korea each saw exports drop 8.6 per cent in H1 2019, followed by Hong Kong and Taiwan which registered a downtick of 3.6 per cent and 3.4 per cent, respectively, the rating firm said.

A key driver of the marked deceleration in these economies had been a significant reduction in exports to China and Hong Kong (a proxy to the Chinese market) in H1 2019.

RAM’s head of research Kristina Fong said the impact on Malaysia’s exports, however, had been comparatively small (lowering overall export growth by only 0.7 percentage point).

“This could be attributed to sustained demand for Malaysia’s chemical and mineral fuel exports from China, a supporting factor not enjoyed by other regional economies,” she added. — Bernama

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