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Nikkei Markets

Malaysia February exports fall fastest in more than 2 years

Analysts expect exports growth to edge higher but still stay muted through 2019

KUALA LUMPUR (Nikkei Markets) - Malaysia's exports fell in February, contracting at its sharpest pace in more than two years, as shipments of petroleum and palm oil declined amid faltering demand from China and the U.S. Exports in February totaled 66.6 billion ringgit ($16.33 billion), 5.3% lower year-on-year, according to the Department of Statistics.

That compared with January's 3.1% year-on-year gain. On a month-on-month, seasonally adjusted basis, exports declined 15.3% in February. Trade activity typically cools in February due to fewer working days and long Chinese New Year holiday, the Ministry of Trade and Industry said in a separate statement.

Economists said in addition to seasonal slowdown, weaker global demand and unresolved U.S.-China trade tension likely led to the sharp markdown in exports.

To account for any distortion from the timing of the lunar new-year holidays, aggregated data show that exports fell 0.8% year-on-year in January-February compared with a growth of 5.1% in December, said Barclays Economist Brian Tan.

Malaysia is relying on resilient consumer spending to power economic growth amid slowing external demand for its exports ranging from electronics to palm oil.

However, policymakers at this trade-reliant nation are growing increasingly wary of the Sino-U.S. tariff tussle. The Southeast Asian nation is exposed to risks from lingering U.S.-China trade spat, rising volatility in financial markets, fickle crude oil prices and disruptions in the commodity sector, the central bank had cautioned last month.

Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, increased 4.9% in February from a year earlier.

Petroleum product shipments however shrank 32.6%, while palm oil shipments fell 11.4%. Exports of mining goods decreased by 5.5% from a year earlier, dragged by lower crude petroleum, while those of agriculture goods contracted by 13.7% in February. In terms of markets, exports to Malaysia's largest trading partner China declined 1.6% year-on-year in February.

Exports to Singapore shrank 2.9%. "We think this is not likely to be a sign of sustained decline," said RHB Research Institute Economist Vincent Loo. "Nevertheless, combined Jan-Feb 2019 export performance still points to slower export momentum and may pose a drag on 1Q GDP growth."

Imports, meanwhile, declined 9.4% to 55.54 billion ringgit in February, led by fall in intermediate and capital goods. On a month-on-month, seasonally adjusted basis, imports decreased 14.4% in February. Trade surplus widened to 11.06 billion ringgit in February, up 22.7% on year but shrank by 3.9% on month.

Bank Negara Malaysia's baseline forecast is for a growth of 4.7%. Malaysia's economic growth picked up pace in the final three months of 2018 after decelerating for four straight quarters, expanding 4.7% in Oct-to-Dec and ended 2018 at 4.7%, sharply slower than 2017's 5.9% growth.

--Jason Ng

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