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Malaysia’s foreign trade to pick up slightly in December 2019, but may face pressure in 2020

Published on 31 Jan 2020.

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RAM Ratings expects Malaysia’s imports and exports to be lifted a respective 3.9% and 1.7% in December 2019, resulting in a RM9.5 bil trade surplus for the month. This contrasts against respective declines of 3.6% and 5.5% the preceding month. The better showing was achieved despite subdued global demand, which has been affecting Malaysia’s trade performance.

Meanwhile, the “phase one” trade deal signed between the US and China on 15 January 2020 could trigger another round of disruptions for global trade flows. Over the next two years, China has now committed to purchasing at least another USD200 bil more of American goods and services, benchmarked against its total purchase value in 2017. The commitment translates into a 58.6% surge in China’s merchandise imports from the US in the first year of the deal, followed by another 19.8% increase in the second year. This has the potential to divert Chinese demand away from non-US producers in the coming years.

Malaysia’s exports to China could be at risk given that the latter’s commitment includes some 83% of goods that it currently imports from Malaysia. Moreover, 12.7% of China’s imports from Malaysia comprise the committed items in which the US has a revealed comparative advantage (RCA). This may shift demand away from Malaysia in favour of more competitive American manufacturers. Under this scenario, the items most at risk would be liquefied natural gas and naphtha due to their sizeable share of Chinese demand, as well as the US’s notable competitiveness in production. That said, a swing in US exports to China may induce the former’s trade partners to seek alternative suppliers if their orders are not met promptly. As such, Malaysia may still stand to benefit. 

 

Analytical contact
Woon Khai Jhek, CFA
(603) 3385 2512
khaijhek@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my

 

About RAM Rating Services Berhad (“RAM Ratings”)

Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains. 

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Publication Date Published Category
Economic Insight: December 2019 Foreign Trade 31-Jan-2020 Economic Insight View PDF

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