Malaysia’s 2020 exports seen declining 10%

PETALING JAYA: UOB Research foresees a 10% drop in exports for the year, even with the gradual reopening of major and regional economies alongside the restarting of most Malaysian business sectors in May.

“Malaysia’s manufacturing purchasing managers’ index (PMI) showed signs of stabilisation in May though the sector continues to contract. As restrictions under the movement control order (MCO) are gradually lifted, we expect demand and supply conditions to resume.

“For now, we maintain our estimate for exports to decline 10% in 2020,” it said.

CGS CIMB Research said April likely marked the trough for trade activity as businesses resumed their operations, in conjunction with the decline in Covid-19 cases in Malaysia.

“Nevertheless, we think that economic activity should recover only gradually to optimal operating capacity, with social distancing measures in place to prevent a second wave of Covid-19 infections,” it said.

The research house is maintaining its gross domestic forecast of -4.3% for 2020, and expects Bank Negara Malaysia to cut the Overnight Policy Rate (OPR) further by 25 basis points to 1.75% in 2H’20.

For April, exports registered a 23.8% decline year-on-year (y-o-y) to RM64.9 billion, the largest decline since September 2009, due to most sectors of the national economy being shut down since March 18, under the movement control order.

Chief statistician Datuk Seri Mohd Uzir Mahidi said imports also registered a decrease of 8% y-o-y to RM68.4 billion.

“In April 2020, Malaysia’s imports exceeded the value of its exports mainly due to the lumpy imports which was valued at RM10.1 billion, resulting trade deficit of RM3.5 billion. This was the first month of trade deficit since October 1997. Meanwhile, Malaysia’s total trade stood at RM133.3 billion, decreased 16.4% y-o-y.

“This gloomy situation can be also observed in the number of transactions, which amounted to 11.7 million transaction for the period of January to April 2020 as compared to 14.3 million transaction for the same period last year. However, based on early indicators Malaysia’s trade may rebound favourably in May 2020 as businesses resumes its operation,” he said.

In a separate statement, International Trade and Industry Minister Datuk Seri Mohamed Azmin Ali said Malaysia’s exports are expected to improve in the coming months, following the government’s move to allow more industries to resume operations and at full operating capacity since May 4.

“Similarly, companies in other countries are also ramping up their business operations. This will boost trade activities between Malaysia and other countries,” he said.

Commenting on the April trade performance, he said the declines in both imports and exports were to be expected, given that most countries around the world were under some form of lockdown to contain the spread of Covid-19.

source https://www.thesundaily.my/business/malaysia-s-2020-exports-seen-declining-10-EE2512633