Malaysia: Exports post a sharper contraction in June in USD terms
Exports plunged 7.3% year-on-year in June in USD terms, worse than May’s 2.9% decline. Moreover, in ringgit terms, exports fell 3.1% year-on-year, confounding market analysts’ expectations of a small expansion and driven by reductions in timber and electronics exports. June’s figure rounded off a weak Q2, with exports likely hit by waning global demand for electronics and U.S.-China trade tensions.
Imports, meanwhile, plummeted 13.2% in June in USD terms, worse than May’s 3.9% drop. In ringgit terms, imports decreased 9.2%, due to lower capital, intermediate and consumption goods imports.
Consequently, the trade surplus increased to USD 2.5 billion in June from 2.2 billion in May, and also widened compared to the USD 1.5 billion surplus recorded in June 2018. The 12-month moving sum of the trade surplus in June, meanwhile, ticked up to USD 30.8 billion from USD 29.8 billion a month earlier.
Commenting on what the trade data could mean for monetary policy, analysts at Nomura commented: “By country, as we expected, demand from tech-oriented countries like Japan and Singapore dropped significantly, but importantly, exports to China also plunged to -12% […] We maintain our 2019 GDP growth forecast of 4%, down more significantly from 2018’s 4.7% […] We therefore continue to expect another 25bp policy rate cut by Bank Negara Malaysia (BNM) to 2.75%, most likely to be delivered at BNM’s September meeting.”