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Nikkei Markets

Malaysia's October exports shrink for third straight month

Economists flag risks to economic growth as prospects of rebound looks blurry

KUALA LUMPUR (Nikkei Markets) -- Malaysia's October exports contracted 6.7% from a year earlier due to lower shipments of key electrical and electronics products, official data Wednesday showed.

Exports in October totalled 90.6 billion ringgit ($21.7 billion), according to data released by the Department of Statistics. That compared with September's 6.8% year-on-year decline. Trade surplus however, widened to an all-time high of 17.3 billion ringgit as imports fell faster than exports.

Contraction in overseas shipments for three straight months through October signals mounting risk to further deceleration in activities in the Southeast Asia's third-largest economy as prospects of a rebound in exports remain blurry, analysts said.

"The worst of Malaysia's trade downturn appears to be over though the recovery could be painfully slow," said Prakash Sakpal, an economist at ING. "Resurgent US-China trade tension bodes ill for the near-term recovery, which could be painfully slow."

Malaysia's recent data was broadly in line with regional trends. Earlier, Singapore had reported its nonoil domestic exports fell year-on-year for an eighth straight month in October due to a drop in electronics shipments. Taiwan's shipments shrank 1.5% in the same month from a year earlier.

Shipments of electrical and electronics goods, which account for more than one-third of Malaysia's total exports, declined 3.2% in October from a year earlier. Exports of petroleum product also declined 28.4% and shipments of palm oil fell 9.5%.

In terms of markets, exports to Malaysia's largest trading partner China declined 11% year-on-year in October. Exports to U.S. grew 2.7% and that to Singapore rose 4.1%.

While exports to the U.S. continued to grow in October, the rate has been consistently moderating since June, MIDF Amanah Investment Bank wrote in a note to clients. "This demonstrates the direct impact from U.S.-China trade disputes."

Imports meanwhile fell 8.7% to 73.3 billion ringgit in October due to a decrease in intermediate goods that accounts for more than half of total inbound shipments. Capital goods imports declined 11.5% and consumption goods dropped 5%.

Malaysia's economic growth will likely decelerate to around 3.5% in the final quarter of the year and 4.3% for the entire 2019, said Barclays Economist Brian Tan post-data release. "The economy will likely remain under pressure in 2020 when we expect further slowdown to 4.0%," he added.

Malaysia mostly relies on domestic demand to power economic growth. However, consumer spending and business investment have decelerated, sparking worries at time when heightened external uncertainty have hurt its economy that is vulnerable to global shocks.

In the third quarter, gross domestic product expanded 4.4% year-on-year, the slowest pace in a year, amid soft household spending and business investment, while exports faltered. The government is forecasting a 4.7% growth for 2019 and 4.8% for 2020.

-- Jason Ng

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