Published on 02 Apr 2020.
RAM Ratings estimates Malaysia’s exports to have surged 16.3% in February (January: -1.5%), boosted by low-base effects and the front-loading of orders amid fears of global supply-chain disruptions due to the COVID-19 pandemic. The same trend is observable for key regional economies. Malaysian imports are also estimated to have accelerated in February, albeit at a slower pace of 1.4% (January: -2.4%), resulting in a trade surplus of RM21.2 bil.
The onslaught of COVID-19 paints a gloomy picture for overall global growth and trade prospects, as numerous epicentres have emerged throughout the world. These include major European economies and the US, which has since emerged as having the highest number of COVID-19 cases.
The American economy - the world’s biggest - is both a key supplier of value-added and large consumer of global output. Within ASEAN, Singapore’s exports are the most vulnerable to American supply disruptions. Some 5.9% of the island state’s gross exports derives value-added input from the US. This comes ahead of Malaysia’s 3.8%. On the demand side, the Philippines and Vietnam have the biggest exposures, with a respective 21.3% and 21.1% of their total exported value-added consumed by the US. This is significantly higher than the ASEAN-wide average of 15.4% and Malaysia’s 14.3%.
Given the scale of the pandemic and the time needed to contain it, what had once been perceived as primarily a China-centric supply-chain disruption has turned into a worldwide issue. As such, global trade will face prolonged and severe weakness in 2020.
Woon Khai Jhek, CFA
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