KUALA LUMPUR (NewsRise) - Malaysia's October exports fell the most in 18 months at a steeper-than-expected rate, led by a sharp decline in shipments of natural gas and crude petroleum, government data showed.
Exports totalled 69.20 billion ringgit ($15.56 billion) in October, 8.6% lower than the 75.7 billion ringgit recorded in the same month last year, the federal Statistics Department said in a statement. That compares to the median 5.6% drop predicted by economists and September's 3.0% year-on-year decrease.
Economists expect a weakened Malaysian ringgit could help boost the country's exports in the months ahead, especially when latest indicators suggest that global trade and manufacturing activities in advanced economies and China remain steady.
"We project exports to turn around" in the first quarter of 2017, in-part due to lower base of comparison and steady commodity prices, said United Overseas Bank's economist Julia Goh.
Exports of crude petroleum and liquefied natural gas plummeted 28% and 40% respectively In October. However, electrical and electronics shipments, which account for more than a third of Malaysia's total exports, grew 1.2% year-on-year during the month.
In terms of markets, exports to Singapore and to the European Union fell 7.5% and 12% respectively in October from a year earlier. However, shipments to China, Malaysia's biggest trading partner, rose 3.4% year-on-year.
A "positive revaluation effects" from the weaker ringgit should support surplus in merchandise trade and current account in the third-largest Southeast Asian economy, said UOB's Goh.
In November alone, the Malaysian ringgit has shed 6.5% against the U.S. dollar, underperforming its regional peers, and adding to the more-than 3.0% loss so far this year.
Total imports, meanwhile, fell 6.6% to 59.4 billion ringgit in October from 63.64 billion ringgit a year earlier led by an 8.9% decline in intermediate goods and an 8.0% fall in consumption goods. Capital goods meanwhile shrank 2.0% in October.
On a month-on-month basis, imports contracted 1.7% from 60.5 billion ringgit.
Malaysia recorded a trade surplus of 9.8 billion ringgit in October, compared to a surplus of 7.6 billion ringgit in September. However, trade surplus narrowed 19.4% when compared to the same month last year.
"This remains in line with our full-year current account surplus forecast of 1.8% of gross domestic product in 2016 and our GDP growth forecast of a slowdown from 4.3% year-on-year" in the third quarter, said Nomura Securities in an investor note. In the fourth quarter, Malaysia's economic growth could decelerate to 4.0% and further to 3.9% in 2017, it said.
That could prompt the central bank to cut benchmark policy rate by 25 basis points in the first quarter of 2017 as the economic growth pace would likely come in below Malaysia's official forecast of between 4.0% and 5.0% in 2017, Nomura added.
Bank Negara Malaysia kept the overnight policy rate steady at 3.00% at its final meeting for the year in November, drawing on resilient private consumption to cushion soft global demand for its exports and drive economic growth.
The central bank had cut the interest rate by a quarter percentage point in July in a bid to halt a decelerating economic growth and brace the country for impact from U.K.'s decision to leave the European Union.