MIDF Research forecasts Malaysia’s exports to contract in 2020 at 8.3pc amid MCO, Covid-19 crisis

MIDF Research said with one full month of MCO in April and conditional MCO in May, the country’s exports performance is expected to deteriorate in the second quarter of 2020. — Reuters pic
MIDF Research said with one full month of MCO in April and conditional MCO in May, the country’s exports performance is expected to deteriorate in the second quarter of 2020. — Reuters pic

KUALA LUMPUR, June 4 — Malaysia’s exports is projected to further contract by 8.3 per cent this year compared to a negative 1.7 per cent growth last year amid Covid-19 crisis, according to MIDF Research.

It said Covid-19 has emerged as the top risk to global trade flows as it affects both supply and demand of goods.

This includes Malaysia particularly with almost two months of the movement control order (MCO), which disrupted production and eventually exports.

“China’s latest external trade performances showed some improvement however the sustainability of it remains questionable at large. In addition, the re-escalation of US-China tension poses more threat to foreign trades. This will hinder most of the countries’ effort to restart their respective economies amid Covid-19 pandemic,” it said in a note today.

MIDF Research said with one full month of MCO in April and conditional MCO in May, the country’s exports performance is expected to deteriorate in the second quarter of 2020.

Covid-19 has dragged Malaysia to record a trade deficit of RM3.5 billion in April 2020, after 269 consecutive months of surplus.

The last trade deficit registered by the country was in October 1997 amounted to RM151.3 million.

The research house said the record deficit in April 2020 is expected to contribute negatively to Malaysia’s economic growth in the second quarter of 2020.

It said during the month, export slumped to over 10-year low since September 2009, declining -23.8 per cent year-on-year, manifesting the impact of a full month of MCO.

Similarly, imports contracted by eight per cent year-on-year but at a far slower pace than exports mainly due to lumpy purchases of transport equipment particularly floating structures pertaining to Petronas Floating Liquefied Natural Gas 2 (PFLNG2).

Meanwhile, imports of transport equipment soared by 232.7 per cent year-on-year during the month.

“As a result, Malaysia’s 269 consecutive months of trade surplus had shifted to a deficit of RM3.5 billion in April 2020. It is the largest trade deficit on record thus far,” it added.

It said re-exports continued to record expansion in April 2029 at 38.2 per cent year-on-year, the highest since October 2018, mitigating the contraction in overall exports.

The growth was driven by re-exports of electrical and electronic (+58 per cent) and petroleum products (+42.5 per cent).

Re-exports of transport equipment growth, which jumped 530.9 per cent had also contributed to the surge as Malaysian carrier returned few units of aircraft to Indonesia.

The ratio of re-export to total export recorded at 28.7 per cent, the highest on record.

“It simply means for every RM1 value of exports, approximately 29 sen of value is made up of re-export component.

“On the other hand, domestic exports which involved high value-added activities declined to a record low of -35.4 per cent year-on-year, dragged down by deteriorating performances of commodity-based sectors and electrical & electronic,” MIDF Research noted. — Bernama  

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