Exports falling faster than expected

KUALA LUMPUR: Malaysia’s exports are decelerating faster than expected, with the October numbers showing a 2.6% decline year-on-year and surprising economists who had expected a 4% to 6% growth instead.

Economists said these latest preliminary data gave a glimpse of the bumps ahead for the export-dependent economy as a result of falling demand abroad due to the global economic slowdown that has seen a number of developed countries slipping into recession.

“We are likely to see much weaker numbers for Malaysia going forward with external demand very weak, and with the unlikelihood that demand for electronics will recover anytime soon,” Alvin Liew, an economist at Standard Chartered, told Reuters yesterday.

Kenanga Research said the poor October export data was a surprise, encouraging more unwinding in the local market, as investors stayed cautious on concerns over a slowing economy and its implications on corporate earnings. The Kuala Lumpur Composite Index fell 0.67 of a point lower to 846.86.

Reuters reported that exports dipped slightly in July 2007 but the last big fall was in March 2007 when they fell 4.5%. Imports for October fell by 5.3% year-on-year compared to analyst expectations of a 1.8% rise.

The data come after South Korea saw exports slide by 18.3% in November, the biggest drop in seven years, and amid tumbling oil and commodity prices, which are key exports for Malaysia.

Exports totalled RM53.46 billion, down 14.2% from RM62.31 billion in September, while imports fell 7.8% to RM43.84 billion. That ate into the trade surplus, which fell to RM9.62 billion in October compared with RM14.5 billion in September.

Releasing the preliminary external trade data yesterday, the Department of Statistics said the decline in exports was mainly attributed to lower exports of electrical and electronic (E&E) products and commodities, namely refined and crude petroleum as well as palm oil.

It said major markets that registered declines were the United States, Singapore, China, Hong Kong and Australia. Singapore, the US, Japan, China and Thailand were the top five export destinations, accounting for 51.7% of total exports in October 2008.

Asean accounted for RM13.6 billion or 25.4% of total exports in October 2008. This was a decrease of 6.1% from October 2007, due to lower exports of refined petroleum products as well as iron and steel products.

Exports to the US fell nearly 19% to RM6.44 billion from RM7.94 billion a year earlier, while exports to the European Union (EU) fell 11.4% to RM6.1 billion, with both declines due mainly to lower exports of E&E products.

Exports to China fell 7% year-on-year to RM4.89 billion from RM5.26 billion due to lower exports of palm oil, crude rubber, manufactures of metal and refined petroleum products.

However, exports to Japan rose 33.4% to RM6 billion, with the main contributors being liquefied natural gas (LNG) and wood products, while exports to India rose 10.7% to RM2.45 billion due to higher exports of crude petroleum and palm oil.

For the 10 months through October, total exports rose 13.9% to RM565.66 billion. Among the top 10 export destinations which registered significant growth were China with an export growth of 29.6%; Japan, 25.9%; India, 25%; Australia, 20% and South Korea 18.9%.

Total exports to Asean rose 16.8% to RM147.77 billion, representing 26.1% of total exports during the period.

Total imports during the 10-month rose 7.4% to RM446.81 billion, contributed mainly by higher imports of consumption goods which grew by 12.9% and intermediate goods, 10.8%.

Reuters reported that Malaysia had pinned its hopes of avoiding a recession on boosting exports to Asia, although the October data showed exports to the other nine Asean countries fell by 6.1% from a year ago and exports to China fell to RM4.89 billion from RM5.26 billion on weaker commodity and oil prices.

Malaysia hopes to record economic growth of 3.5% in 2009, but many economists say it will not manage that. Investment bank UBS sees no growth at all.

The poor trade data may spur Bank Negara into action after its first rate cut in five years earlier this month when it shaved 25 basis points off its key rate to 3.25%.

“The central bank will look into at least another 25 basis points. I’m looking at 50 basis points in January and February,” said Gundy Cayhadi, economist at IDEAglobal.com.