Trade performance still weak in September with potentially lower Indian demand posing further downside risks

Published on 01 Nov 2019.

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RAM Ratings expects Malaysia’s exports to decline 0.6% in September (August: -0.8%). Similarly, imports are envisaged to post a 0.4% contraction, albeit still a notable recovery after the steep 12.5% dive in August. This will bring Malaysia’s overall trade surplus to RM15.3 bil at month-end. The lacklustre showing is underlined by subdued global trade and industrial performance in the same month.

Recent reports that India may consider imposing trade curbs against Malaysia contribute further downside risks to the latter’s export prospects amid the already challenging global landscape. India has emerged as one of the main contributors to Malaysia’s export growth this year. As Malaysia’s eighth largest export destination, goods heading to India increased 7.1% in 8M 2019, against the overall 0.4% contraction in exports. “India was also the second biggest contributor to Malaysia’s export growth in 8M 2019, with a positive contribution of 0.3 percentage points and marginally behind the US (0.4 percentage points),” observes Kristina Fong, RAM’s head of research. Although India only made up 3.6% of Malaysia’s total exports, the strong growth had helped offset some of the deceleration in overall external demand this year.

Malaysia’s current healthy export momentum to India may be significantly dampened if there are restrictions against the import of Malaysia’s palm oil-related products. This is because palm oil is the biggest contributor to the overall rise in demand from India this year. Exports of palm oil to India jumped almost 70% in 8M 2019, with a positive contribution of 11.0 percentage points. Malaysia’s palm oil-related sector is also particularly vulnerable to trade measures by India given the significance of the latter as an export destination. The palm oil sector, along with the metals industry, stand to lose the most as exports destined for India comprised a respective 10.4% and 10.8% of these sectors’ total exports in 2018.


Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512

Media contact
Padthma Subbiah
(603) 3385 2577


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Publication Date Published Category
Economic Insight: September 2019 Foreign Trade 01-Nov-2019 Economic Insight View PDF