BULLISH net exports are expected to contribute positively into the third quarter of 2020 (Q3) gross domestic product (GDP), which is scheduled to be released next month.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said Q3 nominal exports grew by 4.4% year-on-year from a 15.1% contraction in the preceding quarter, while imports contracted 6.3%, smaller than the double-digit pace in the previous quarter.
Overall, the trade surplus balance widened from RM27.6 bil in Q2 to RM60.4 bil in Q3, which represents 68.4% growth over the same period last year.
As for September, Malaysia’s total exports came in better-than-expected at 13.6% compared with 2% per cent growth estimates by a Bloomberg survey, he noted.
The growth in last month’s performance was contributed mainly by higher electrical and electronics (E&E) exports of 33% and rubber products which shot up by a whopping 115.8%.
“Such performance is very much in line with JP Morgan Global PMI, which rose to 52.1 points at the end of September from 47.9 points at the end of June this year.
“So, we should expect strong recovery in the 3Q 2020 GDP. Nonetheless, the sustainability of such recovery momentum is still vulnerable, especially with the conditional movement control order (CMCO) re-implemented in key states from mid-October to mid-November.
“Overall, this is a positive development and it makes more sense that the standard operating procedures have to be fully adhered to in order to ensure the reopening of the economy continues alongside more stimulus measures from the government,” Mohd Afzanizam added.
However, he reckoned continued risk as the latest data showed that new COVID-19 infections have flared up again, threatening to halt economic activities with the re-implementation of partial lockdown measures in certain states, albeit targeted.
“So, the recovery is still very much at a nascent stage and it’s highly dependent on how well the virus spread can be contained and how soon the vaccine can be discovered and distributed,” he added.
Meanwhile, MIDF Research, in a note, said it is maintaining export forecast at -3.5% this year.
“With the latest performance in September, Malaysia’s year-to-date exports growth averaged at -3.7%, just a shade below our full year forecast of -3.5%.
“Exports outlook moving forward will continue to be supported by sales of selected products, particularly E&E, palm oil and rubber products.
“We expect overall increasing trend in sales of these goods to continue for the remaining of the year in line with resumption of activities globally.
“Despite the recovery, outbound shipments will remain lower than last year’s levels as multiple downside risks remain prevalent, including the new wave of COVID-19 and rising protectionism, hindering the economic recovery process of most countries,” it said in a note.
The research house said September exports of 13.6% is the highest expansion since October 2018.
Overall, total trade expanded by 5.5% year-on-year during the month.
As imports fell while exports grew robustly, trade surplus recorded at about RM22 bil, the second largest value on record after RM25.2 bil in July this year.
On a monthly basis, both exports and imports increased by 12.4% and 1.6%, respectively.
RHB Research has also maintained its nominal exports forecast at -6.0%, with downside risks to global demand still remain large, as most countries are facing high numbers of new COVID-19 cases.
“Given the nature of commodity fluctuations, palm oil prices may retract, leading to potential lower export growth down the line.
“Additionally, the rising number of new COVID-19 cases globally has prompted some countries to reinstate tighter measures, keeping global demand in check,” economist Ahmad Nazmi Idrus said in a note. – Oct 28, 2020
