Economic Highlights (Malaysia) - 04/04/2014

Export Growth Picked Up In February, Recovery Underway

¨      Exports inched higher to 12.3% y-o-y in February, from +12.2% in January and compared with +14.4% in December, partly boosted by a lower base effect and a weaker currency. This was due to a faster increase in the shipments of E&E products during the month. A slower increase in the exports of non-E&E goods and commodity, however, offset part of the gains.

¨      In terms of markets, the moderation in exports was attributed to a rebound in the exports to ASEAN countries, with shipments to Singapore, Philippines, Vietnam, Myanmar and Brunei picking up during the month. Similarly, exports to Japan grew at a faster pace, while exports to the US reversed into a gain in February. These were, however, offset partially by a smaller increase in shipments to China, while exports to the EU moderated during the month.

¨      On the external front, investors are paying close attention to China’s latest developments and whether it could avoid a full-blown credit crisis in an effort to adjust its economic imbalances. Although there are downside risks, we are of the view that China has the capability and financial power to overcome it. Also, there are bright spots in the global economy and global growth is building momentum, broadly supported by the advanced economies, particularly the US. As a whole, the world economy is on track to chart a stronger growth in 2014 that could lift the country’s exports in the period ahead.

¨      Total imports also grew at a faster pace of 9.5% y-o-y in February, compared with +7.2% in January and compared with +14.5% in December. This was largely due to a faster increase in the imports of intermediate and consumer goods, but were offset partially by a drop in the imports of capital goods.

¨      As exports growth grew at a faster pace than that of imports, the trade surplus widened to MYR10.4bn in February, from a surplus of MYR6.4bn in January and compared with a MYR9.6bn in December. Going forward, the current account surplus in the balance of payments is projected to narrow further to MYR28.7bn or 3.4% of GNI in 2014, after recording a drop in surplus of MYR37.3bn or 3.9% of GNI in 2013.

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