Exports weakening Shipments likely to decline well into next year

PETALING JAYA: Malaysia’s exports are expected to decline well into 2009 after a dismal performance in October which saw the effects of falling consumer demand kick in.

“The sharp reversal in merchandise exports, from a 15.1% year-on-year increase in September to a 2.6% contraction in October, suggests exports in November will slump further,” an economist said.

He said the gloomy outlook was also premised on the forecast that demand in recession-hit developed economies would take a “deeper-than-expected hit”.

Malaysia’s exports in October fell 2.6% to RM53.5bil from a year earlier, the first decline in 15 months.

The economist forecasts about a 5% drop year-on-year in Malaysia’s exports in November and sees further contraction going into 2009 as the full impact of the slower global growth takes its toll on the country’s exports.

CIMB Research chief economist Lee Heng Guie concurred. “It will not be good,” he said.

For next year, Lee said he expected exports to contract up to 3% year-on-year against the Government’s forecast of 1.5%.

“We are likely to see a more pronounced price effect of the commodity fallout in the first half of next year, coupled with continued sluggish demand for electrical and electronics (E&E) products due to reduced consumer spending.” he said.

Year-to-date, the E&E exports were the country’s top revenue generator, accounting for RM217.8bil or 38.5% of total exports. Palm oil and palm oil-based products were second with a combined value of RM56.3bil, or 10% of total exports.

Meanwhile, the sentiment among export-oriented local industry players appeared to be mixed, according to observers.

An industry source noted that certain major multinational corporations (MNCs) such as Intel, Dell and Motorola used local E&E-related companies as their main materials and equipment suppliers.

This could mean these companies are highly dependent on MNCs.

“If the economic crisis becomes worse, there will be a drastic reduction in demand. Equally important is the possibility that future investments or re-investments would also come to a halt,” he said.

The source said these local companies would “be badly hurt” and estimated they would suffer at least a 30% drop in business, hence having a huge impact on their bottom lines.

Malaysian-American Electronics Industry (MAEI) chairman Datuk Wong Siew Hai said he expected export sales in the first half of next year to be even weaker as demand continued to decline.

“The fourth quarter continues to be challenging with sales dropping by as much as 20% compared with the previous quarter.

“For 2008, MAEI members are expected to register a possible contraction from 5% to 10%,” he said. MAEI’s 17 member-companies registered export sales of RM73.8bil, or 27.7% of Malaysia’s total exports of E&E products last year.

An MQ Technology Bhd spokesman told StarBiz that although he expected exports to “slow a little” next year, business was “still okay”. MQ, which is involved in consumer electronics, counts Japanese firms as its biggest customers. “Japan, although in recession, is a mature market and relatively stable. Our customers are cash-rich and this is the most important thing,” he said.

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The Star-Yvonne Tan