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Export momentum likely sustained in October, but outlook uncertain

Published on 04 Dec 2018.

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RAM Ratings expects Malaysia’s export growth to come in at 10.8% in October, despite that being the first full month of the latest round of American import tariffs on China (from 24 September onwards). This is as global value-chain activities will likely be sustained by front-loaded orders amid greater concerns (up until the recent announcement on 1 December) over the rise in US tariff rates – from 10% to 25% - on USD200 billion of Chinese imports that had earlier been scheduled to take effect on 1 January 2019. The slated increase has now been put on hold following recent talks between Presidents Donald Trump and Xi Jinping at the G20 Summit in Buenos Aires, Argentina; they have agreed to a 90-day truce to allow time for fresh negotiations.

“Although this pauses an escalation of the trade war for now, uncertainties still cloud external demand prospects. As such, the current front-loaded demand momentum could taper off temporarily in the lead-up to the end of the 90-day window next February,” notes RAM’s head of research, Kristina Fong.

In line with the sustained external demand, import growth is expected to accelerate to 6.4% in October. Overall, the trade surplus is projected to come in at RM14.3 billion in October.

Despite the global volatility and uncertainty, Malaysia is still an attractive destination for foreign direct investment, as underlined by the increase in investment approvals in 1H 2018, which should help stimulate more industrial activities and export growth over the longer term. Malaysia is also among the potential prime beneficiaries of the ongoing US-China trade war given its competitiveness in terms of revealed comparative advantage in semiconductors and chemicals, which have been hit by the tit-for-tat actions between the two economic giants.

 

Analytical contact
Woon Khai Jhek, CFA
(603) 7628 1093
khaijhek@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

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Published by RAM Rating Services Berhad
© Copyright 2018 by RAM Rating Services Berhad



Publication Date Published Category
Economic Insight: October 2018 Foreign Trade 04-Dec-2018 Economic Insight View PDF

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