RAM expects Malaysia’s November export growth to decelerate

KUALA LUMPUR: RAM Ratings expects Malaysia’s November export growth to decelerate to 3%, as front-loading activities which had temporarily boosted exports by 17.7% in October subsided.

The rush to front-load orders in October was driven by greater concerns over the planned increase in United States tariffs from 10% to 25% on US$200 billion of Chinese imports, RAM said in a statement today.

“Export stimuli will remain limited over the next few months, a scenario further supported by a contraction in China’s manufacturing export orders in the last several months.

“In line with weaker external demand, import growth is expected to ease to 1.8% in November,” it said.

Overall, the rating agency projected the trade surplus to come in at RM11.1 billion in November.

Ram also noted that Malaysia had yet to ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which came into force on Dec 30 with seven members.

Its head of research Kristina Fong said Malaysia’s absence was unlikely to have significant implications to its trade performance in the near-term, given that it already has free trade agreements (FTAs) with five of the seven signatories.

“The two remaining countries, Canada and Mexico, constitute a small share of overall exports at just 0.4% and 1% respectively, thus limiting potential adverse trade diversion away from Malaysia,” she said.

While the direct impact of Malaysia’s absence from the deal could be muted in the short run, RAM said, it could potentially cause the country to lose out over the longer term, as regional members in the multilateral FTA could be favoured as foreign direct investment destinations.

“Standardised rules of origin and lower regulatory barriers brought about by the CPTPP could entice firms to more readily build up supply chains between member countries,” Fong said.

“This dynamic could, in turn, foster the development of new industries and global value chains and build new capacities within the alliance.”

Source: FMT