Economic Highlights (Malaysia) - 19/05/2014

Current Account Surplus Widened In The 1Q

¨      The current account surplus in the balance of payments increased by 33.8% to MYR19.8bn in the 1Q, albeit at a slower pace, following an increase to MYR14.8bn in the 4Q and compared with a surplus of MYR10.0bn in the 3Q. This was due to a larger surplus in the merchandise trade account, as well as a smaller deficit in the services and income accounts during the quarter. These were, however, offset partially by a bigger deficit in the transfer account.

¨      The financial account, on the other hand, recorded a bigger outflow of MYR37.6bn in the 1Q, compared with an outflow of MYR9.7bn in the previous quarter. The deterioration was attributed to a bigger net outflow of foreign portfolio funds, while net direct investment swung to record an outflow in the 1Q. The latter was due to a smaller inflow of foreign direct investment (FDI) and a bigger outflow of outward direct investment. A reversal into a net outflow in financial derivatives in the 1Q made it worse. These were, however, mitigated by a smaller outflow in other investments during the quarter.

¨      Errors & omissions swung into a surplus of MYR0.4bn in the 1Q, compared with a deficit of MYR7.8bn in the previous quarter. As a whole, the overall balance of payments recorded an outflow of MYR17.3bn in the 1Q, widening from a previous outflow of MYR2.7bn in the 4Q.

¨      Going forward, although we expect Malaysia’s exports to recover in 2014, it will unlikely be very strong given the challenges faced by the global economy, particularly in Japan and China. The growth of imports, on the other hand, will likely continue to outpace that of exports, on the back of the implementation of the various economic programmes to sustain domestic demand. This will likely lead to a narrower surplus in the merchandise trade account during the year, as growth of imports outpaced that of exports. As a whole, 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.

Link to the report:  Economic Highlights - Current Account Surplus Widened In The 1Q                               

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