KUALA LUMPUR (Nikkei Markets) -- Malaysia's exports unexpectedly contracted in September, recording the steepest fall in three years that reflect mounting risks facing the trade-reliant economy as U.S.-China trade war hurts external demand.
Exports in September totalled 77.7 billion ringgit ($18.72 billion), 6.8% lower when compared with 83.34 billion ringgit recorded in the same month last year, according to data released by the Department of Statistics. In August, exports fell 0.8% year-on-year.
While economists widely expect the central bank to hold the policy interest rate steady this year, ING forecasts Bank Negara Malaysia to cut the rate by a quarter percentage point tomorrow at its scheduled review to support growth as global demand eases.
"The electronic export vigour observed earlier in the year has ended," said ING Asia Economist Prakash Sakpal, who is forecasting a slight dip in third-quarter gross domestic product growth to 4.8%. "With continued external headwinds, downside growth risks are rising."
The decline in September exports was largely due to a lower commodity exports that worsened the drop in key shipments of electrical and electronic products.
"Our estimates suggest sequential decline in commodities export volumes was even sharper," said Barclays Economist Brian Tan. "This, in turn, seemed to be primarily due to lower volumes, which may be a sign of more supply disruptions that could continue to weigh on industrial production."
A recovery in natural gas output from production disruption that began in 2018 had partly aided Malaysia's economic expansion in the second quarter when gross domestic product rose 4.9% from a year earlier. Malaysia will report July-to-September GDP data next week.
The latest data was broadly in line with regional trends. Singapore reported earlier that its nonoil domestic exports fell year-on-year for a seventh consecutive month in September on another sharp drop in electronics shipments. Taiwan's shipments shrank 4.6% 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 12.2% in September from a year earlier, while refined petroleum product exports fell 14.7%.
In terms of markets, exports to Malaysia's largest trading partner China declined 3% year-on-year in September. Exports to Singapore fell 11.7%, although deliveries to U.S. grew 6.6%.
In addition, imports rebounded 2.4% to 69.37 billion ringgit in September from 67.77 billion ringgit in the same month last year. Imports of capital goods and intermediate goods increased 7.3% and 11.1% respectively, while consumption goods inbound shipments expanded 15.1%.
September's weak exports and imports' growth squeezed the trade surplus 46.5% on year to 8.3 billion ringgit.