Malaysia: Exports rebound in USD terms in July
September 4, 2019
Exports rose 0.3% in USD terms over the same month a year prior in July, recovering from the 7.3% plunge in June. Moreover, exports denominated in ringgits increased 1.7% year-on-year in July, rebounding from June’s 3.1% fall, and surpassing market analysts’ expectations of a continued 2.5% contraction. July’s turnaround was largely driven by a rebound in electrical and electronics exports, which constitute just over 40% of total exports, while exports of petroleum products also picked up.
Imports, meanwhile, continued to plummet in USD terms, albeit at a weaker pace than in June (July: -7.6% yoy; June: -13.7% yoy). In ringgit terms, imports decreased 5.9%, due to lower capital, intermediate and consumption goods imports, following a 9.2% fall in June
Consequently, the trade surplus increased notably to USD 3.5 billion in July from 2.5 billion in June, and also widened compared to the USD 2.0 billion surplus recorded in July 2018. The 12-month moving sum of the trade surplus in July picked up to USD 32.6 billion from USD 31.2 billion a month prior.
Commenting on implications for monetary policy, Prakash Sakpal, economist at ING, noted:
“While strong exports and the trade surplus should support Malaysia's GDP growth in the rest of the year, it would be challenging for the economy to continue bucking the global slowdown amid an increasingly unfriendly external trade environment. […] we believe the Bank Negara Malaysia, the central bank, will see through the present economic strength and foster a more accommodative policy environment in the rest of the year. We maintain our forecast of an additional 50 basis point rate cut to the BNM’s overnight policy rate this year.”
Author: Lindsey Ice, Economist