Malaysia export growth to dip to 4%

Nasty economic conditions in the Eurozone, US and China will drag exports performance down.

According to DBS, headline export growth is expected to register 4.0% YoY, down from 5.4% in the previous month as external headwinds continue to weigh down on export performance. Import is likely to record an increase of 6.1%, up from 3.6% previously, due to resilient domestic consumption and strong investment demand. Overall trade surplus should moderate to MYR 8.8bn, from MYR 9.2bn.

Here's more from DBS:

Essentially, the story for Malaysia has not changed much from six months ago. Export performance is expected to remain sluggish, weighed down by the dire economic conditions in the Eurozone as well as the US. Slowdown in China is also having an effect on export sales.

Yet, despite the drag from the external front, the economy continues to post healthy GDP growth on the back of a buoyant
domestic economy. GDP growth in the second came in stronger than expected at 5.4% YoY while neighbouring country Singapore struggled with the global slump by posting a contraction in GDP.

Separately, inflation has remained benign. Malaysia now has one of the best inflation profile in East Asia. Apart from the subsidy programme, the consistent monetary policy put forth by the central bank has played a crucial role in maintaining price stability while lending support to domestic growth. Latest July inflation registered just a mere 1.4% YoY.

Although inflation is likely to inchtowards the 2.0% level by the end of the year, it is still fairly low by historical standards. The risk between growth and inflation is fairly well balanced in Malaysia . With that, Bank Negara is in a good position to keep the Overnight Policy Rate (OPR) steady at 3.00% for the rest of the year.

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