Friday, 9 February 2018

(The Star) Slower export growth

PETALING JAYA: The stronger ringgit and a slowing global electronics cycle may throttle down Malaysia’s export growth pace in 2018, following a record high performance last year.

In fact, the slowdown in the exports momentum was already seen in December 2017, as total exports edged up well below market expectations.

Malaysia’s export growth in 2018 could decelerate also as a result of the technical high base effect, which was caused by the surge in the country’s exports last year.

Despite the projected moderation in overall trade, analysts continue to be optimistic on the country’s exports performance, moving forward.

In its published note, CIMB Research said that it has maintained its export growth forecast for 2018 at approximately 9.8%.

In comparison, Malaysia’s total exports surged by 18.9% year-on-year (y-o-y) in 2017, with imports increasing by 19.9% y-o-y.

“We project Malaysia’s exports to increase by 9.8% in 2018, but watch out for short-term weakness.

“This is largely because a slowing expansion in the electronics cycle and a shallower commodity price rebound.

“Apart from that, export growth would likely moderate, given the more muted gains in plantation crop production after the post-El Nino normalisation in 2017 and the translation effects of a stronger ringgit,” said the research house.

AmBank Research is also sanguine on Malaysia’s export growth in 2018, backed by stronger global growth and global exports volume.

The research firm anticipates the country’s exports to grow by 9.5% this year.

Malaysia’s total exports rose to RM935.4bil in 2017 – the strongest growth since 2005 – underpinned by exports of electrical and electronics (E&E) products and also major commodities.

Imports grew to RM838.14bil, driven by higher imports of intermediate and capital goods.

In a statement yesterday, Plantation Industries and Commodities Minister Datuk Seri Mah Siew Keong said that commodity sector export in 2017 had recorded the highest peak since 2011.

The commodity sector remains the largest net exporter, with total exports rising by 14.4% y-o-y in 2017.

Trade balance-wise, Malaysia recorded a trade surplus in 2017 which widened by 10.3% to RM97.25bil, according to the International Trade and Industry Ministry.

“This is the largest surplus registered since 2012. In fact, this was the 20th consecutive year of trade surplus since 1998,” said the Ministry.

China continued to be Malaysia’s largest trading partner for the ninth consecutive year since 2009. In 2017, Malaysia’s trade with China increased by 20.6% to RM290.65bil.

CIMB Research pointed out that the country posted a weaker exports growth in the last month of 2017, despite the strong full-year trade performance.

“Gross export growth moderated to 4.7% y-o-y in December 2017, dipping under our forecast of 5.7% and well below market expectations of 12.7% as indicated by the Bloomberg consensus.

“Across the board moderation in December dragged the export growth of manufactured goods to 5.5% y-o-y, the lowest since October 2016,” it said.

Meanwhile, Kenanga Research expects the commodities and E&E exports to remain resilient and supportive of overall trade, moving into 2018.

“While December’s export moderation pointed to a tapering of the 2018 growth momentum, the outlook for the commodity and E&E sectors remain positive on the back of synchronised global growth and bullish commodity prices.

“We, therefore, expect Malaysia’s export growth to remain elevated at 7% to 10% this year,” said the research firm.

On the ringgit’s potential impact on the country’s trade performance, Kenanga Research said that the local currency would likely remain supportive of export competitiveness, moving forward.

The ringgit has strengthened significantly against many major currencies in recent months, driven by stronger crude oil prices, a turnaround in foreign investor flows and the weak US dollar environment.

However, the ringgit’s rate of appreciation declined in January, trading at an average of RM3.958 per US dollar during the month. Kenanga Research indicated that the relative strength of the ringgit would diminish and plateau moving into 2018.

“We also expect the benefits of reduced import costs from any further potential strengthening of the local currency to outweigh the rise in export prices, and therefore, retain our view for a healthy trade balance for the year,” it said.