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Ministry of International Trade and Industry Malaysia Official Blog

Miti forecasts moderate growth in trade, exports

Posted by admin2 on June 16, 2015 at 11:23 am
KUALA LUMPUR: Malaysia’s trade and exports are expected to grow at a moderate pace of 2% to 3% each this year, lower than the 5.9% and 6.4% achieved respectively in 2014, said Minister of International Trade and Industry, Datuk Seri Mustapa Mohamed.

“The 2% to 3% increase in trade and exports takes into account the following: one is the weakening global economy from 3.8% to 3.5%, number two is the uncertainty in currency market, number three is the decline in oil prices and perhaps continued modest growth in terms of commodity prices; we don’t see a sharp uptrend. The two growth forecasts have taken into account these factors,” he told reporters at a briefing on Malaysia’s 2014 trade performance yesterday.

He said crude oil prices have been hovering around US$50 per barrel in the past few days but he believes that the US$55 per barrel forecast this year by the ministry is achievable and recovery in oil price is expected next year.

Commenting on the currency, Mustapa said the weaker ringgit will make Malaysian exports more competitive especially in the electrical and electronic (E&E) sector. Although some exports are denominated in the US dollar, he does not foresee much impact.

“Overall, Malaysia’s exports will be more competitive although many people argue that it is not a very strong positive point. That’s why we expect 2% to 3% growth in trade and exports,” he added.

The ministry is confident in achieving another year of trade surplus despite the lower targets this year. Last year, the trade surplus grew 16.6% to RM83.11 billion, marking the 17th consecutive year of trade surplus.

Total trade grew 5.9% to RM1.45 trillion last year from RM1.37 trillion a year ago while exports rose 6.4% to RM766.13 billion, surpassing the forecast export growth of 6% in the 2014/2015 Economic Report. Imports rose 5.3% to RM683.02 billion.

Mustapa said manufactured goods bolstered export performance, growing by 7.1% and exports to Asean were higher, making up 28% of total exports.

Exports of almost all manufacturers grew, contributing RM587.25 billion or 76.7% share of total exports. The E&E segment was the top performer, growing 8.1% to RM256.1 billion and accounting for 33.4% of Malaysia’s total exports.

The Asean market accounted for 26.8% of Malaysia’s total trade last year, valued at RM389.03 billion with an increase of 3.9% from 2013. Exports to Asean increased by 5.9% to RM213.58 billion. Exports to all Asean markets grew last year except for Indonesia, which fell 4.1% to RM31.76 billion.

Mustapa said with the weak global economy and uncertainty in Europe, Malaysia’s focus for 2015 will be on Asean markets and new markets such as Africa and South America.

“Traditional markets will continue to play an important role in driving Malaysia’s growth rate but beyond that, we are looking at Asean which is important and also some new markets. That’s how we are trying to deal with the slowing down in world economic growth,” he said.

Bank of America Merrill Lynch (BofAML) Asean economist Chua Hak Bin said it is cautious about the 2015 outlook, given lower oil and gas prices and weak global growth.

“In our view, lower oil prices will have only a small impact on the current account in 2015, given the small oil trade balance. Falling LNG prices will likely be the main risk and pressure on the current account. Malaysia’s LNG trade surplus is huge, at RM60.4 billion (about 5.6% of GDP) in 2014. LNG prices track oil prices with a four to six month lag. This suggests that LNG prices will likely be down by about 50% by mid-2015,” he said in his report.

He estimates that a 50% decline in LNG prices could shave the current account surplus by 2.5% to 3% of GDP, putting the risk of a current account deficit within striking distance.

Meanwhile, AllianceDBS Research maintained its full-year 2015 GDP forecast at 5% with downside risk and expectation of a narrowing current account surplus-to-GDP ratio to around 2% this year.

“The current external outlook demand remains challenging. China’s January manufacturing PMI index entered a contractionary phase at 49.8. Besides, major advanced economies are currently grappling with low inflation risks attributed to the fall in energy prices,” it said in its report.

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