Malaysia: Export growth moderates in May but stays robust
Export growth moderated in May from April’s strong reading on softening foreign demand for electrical and electronic products, and refined petroleum products; and a contraction in exports of palm oil and palm oil-based products. The moderation in export growth was partially due to a large base effect, as exports expanded 23.2% in May 2017. While exports nonetheless grew robustly in May, expanding 13.1% over the same month a year ago in USD value terms, they were down from the prior month’s 29.7% increase. In ringgit terms, growth in exports moderated to 3.4% year-on-year in May, down from 14.0% in April and below market expectations of a softer moderation to 6.4%.
Growth in imports also strongly decelerated from the prior month. In May, imports expanded 9.5% over a year ago in USD value terms, which was down significantly from April’s 24.2% increase. The result was driven by a lower imports of consumption, intermediate and capital goods. Imports of consumption goods contracted at the sharpest rate, followed by intermediate goods. Capital goods imports recorded a small drop that contrasted the prior month’s solid expansion. In ringgit terms, import growth came to a near standstill, logging a meager 0.1% increase in May and strongly contrasting the prior month’s 9.1% growth rate.
As a result, Malaysia’s trade surplus narrowed from USD 3.4 billion in April to USD 2.1 billion in May. It was nevertheless up significantly from the USD 1.3 billion surplus clocked in the same month of the previous year. The 12-month moving sum of the trade surplus increased from a revised USD 28.3 billion in April (previously reported: USD 28.4 billion) to USD 29.1 billion, the highest level since January 2013.
The deceleration in export growth may reflect the impact of uncertainty over domestic politics in the lead up to the 9 May elections that resulted in a surprise defeat for the ruling party, which had been in power since the country gained independence in 1957. Although the current round of tariffs on China imposed by the U.S. administration has not yet affected Malaysian exports, going forward escalating trade tensions between the U.S. and China pose a risk to the Malaysian economy, as the impact of tariffs is likely to spill over into other countries. Moreover, lingering uncertainty is expected to drag on exports.