KUALA LUMPUR: Malaysia’s external trade growth in January may have beaten consensus forecasts, but some economists say it is too early to tell if the numbers point to a sustainable recovery in the economy.
The release of preliminary data from the Department of Statistics showed the country’s exports grew 37% year-on-year (y-o-y) to RM52.45 billion in the first month of the year, while imports rose 31% y-o-y to RM39.52 billion. The official data will be out tomorrow.
Month-on-month (m-o-m), however, exports and imports declined 4.1% and 7.2% from RM54.7 billion and RM42.6 billion, respectively, recorded in December.
“Despite the encouraging y-o-y growth, we have yet to see a convincing pick-up in economic activities on a monthly basis. We may need to see a more convincing m-o-m growth in the next few months to conclude that the economy is on track to a sustainable recovery,” OSK Research said in a note yesterday.
January’s y-o-y export growth was largely helped by a low base in 2009, although economists also credit the global economic recovery gaining traction.
“Most major export products grew on a yearly basis in January, except for the liquefied natural gas segment. Also, exports growth was notable for most major markets except for India,” TA Securities said.
It added, however, on a m-o-m basis, external demand for several export products including electrical and electronics (E&E), crude petroleum, refined petroleum products and machinery and appliances fell during the month.
It also said exports to China, Singapore, the US, Thailand, Australia and India had declined on a m-o-m basis.
“The fact that capital goods fell both y-o-y (2.9%) and m-o-m 20.7% may also indicate that businesses are still reluctant to invest in factories, machinery and equipment to raise production levels,” OSK Research said.
The research house added that January’s strong yearly trade figures, including for other countries, could be “misleading” due to 2009’s low base, noting that the substantial growth momentum could taper off towards the second half of this year.
Kenanga Research also said though there was a higher probability of exports recording double-digit growth in 1H09, its growth momentum could subside in 2H10, due to the higher base in 2H09 and an expected moderate growth trajectory for the global economy after 1H10.
“Hence, we believe export growth this year may not exceed 10% after falling 16.6% in 2009,” it said.
Of note, however, are other economic indicators which showed continued export growth momentum that cannot be fully written off yet.
According to AmResearch, the US’ Institute for Supply Management said its manufacturing index, the purchasing managers’ index (PMI), grew for the 10th straight month, to 56.5% in February, albeit at a slower pace than January’s 58.4%.
AmResearch also said the Global Total Output Index, produced by JPMorgan and other research and supply management organisations, rose to 53.6 in February from 53.2 in January, staying above the 50 mark that separates growth from contraction, for the seventh consecutive month.
“Going by the PMI and data globally in February, we are confident of the trend continuing to gain momentum in the future,” the research house said.
Meanwhile, Maybank Investment Bank said the semiconductor industry’s book-to-bill ratio rose to 1.2 in January from 1.07 in December, pointing to optimism over the industry’s outlook.
“The Semiconductor Industry Association expects chip sales to grow 10.2% in 2010 and 8.4% in 2011 after the 14.4% contraction in 2009, which is positive for Malaysia’s E&E industry and exports,” it said.
The investment bank said it is maintaining its 2010 trade forecasts, at 10.4% and 13.9% y-o-y growth for exports and imports respectively, after both fell 16.6% last year.
It added the government is set to officially revise upwards its 2010 real GDP growth forecast later this month, to between 5% and 6% from between 2% and 3% previously.
“This should include upgrades in the conservative trade growth forecast of 5.3% for exports and 6.7% for imports to at least higher single-digit numbers, which for exports is expected to be between 6% and 7% according to the Minister of International Trade and Industry recently,” it said.
This article appeared in The Edge Financial Daily, March 09, 2010.
Frankly speaking, when I read this piece, my mind was referring to a blog posting made by dinturtle not long ago on GDP (or KDNK in Bahasa Malaysia). How significant these kind of reports to most Malaysians on the street? How this news on improve of exports or even GDP really touches the most Malaysian lives?
First, we need to distinguish this kind of news covers on the macro economics point of view. It gives an overview how the country is performing. It does not specifically focus on single Malaysians GDP (for example), but millions Malaysians too. So, in other words, not all enjoying the same rate of increment as reported (or even among local competitors too). Malaysians on the street need to understand this. Public need to be explained from where the views are taken and how does it relates to daily business.
However, from the day one Malaysians being introduced to big words of management textbook and dictionary, most people are getting more concerned and confused. Confused in a sense not all Malaysians studied economics, management or finance management. Even some of us struggling to manage own pocket money to survive daily.
So, I’m pretty sure that concepts introduced can be put in simple words. Explain to the public of how the New Economic Model can help Malaysians to improve and improvise what we are currently having. Failing to explain can lead to misunderstanding and making some not confident with what are the Government is proposing to do. Maybe, at one point of view, this can be considered as Barisan led government is taking political risk. Imagine if you are trying to tell to the rural folks. Do you think that they will understand what are saying if you use “NKRA”, “KPI”, “GDP”, “Open Economy” or all sorts of economic terms? Of course at the end they will clap and cheer for you (for any chance of goodies they will get after the talk), but do they really understand what are you saying? In simple words, of course Barisan led government is taking political risk because, at the end of the day, those bombastic explaination ain’t getting more money inside their pocket. When the money is hard to get, the stomachs get hungry and people will get angry!!!
Another aspects need to be address are the concerns on Bumiputera’s survival in Malaysian economic landscape. How can the mass of Bumiputera can survive and improve? We have made known that exports have improved, but how many of it giving positive impact to concerned Malaysians? Yes, there one or two tycoons, but many are struggling daily. I am not suprised when DPMM voiced such concerns, hoping NEM can do something for Bumiputeras.
Yes, there are some Bumiputeras that has acheived success and wealth, but many are still lagging behind. I’m pretty sure that we are to study properly the structure of economic activity, we will know how the pattern it would be. Perhaps it will not be as pre-independence time whereby most Bumis were government officials, farmers, Chinese were traders and Indians for working in estates. Chinese and Indians generally improved whereby I’ve came accross not long time ago on the per capita income accroding to Malaysian social structure (sorry, I can’t recall the source). In which, I do hope for Bumis that NEM will not neglect them. Personally, I do pray that all will be REALLY taken care well, as informed by Finance Minister II.
It is also noted that to work this NEM, Human Capital Developement (see, “management” words, but do ALL Malaysians understand that term?) is vital. Of course, to drive Malaysians Economic to highly competetive level, foundation need to be strong. Therefore knowledge and skill is important. However, just curious though.. how this is different from K-Economyconcept introduced back in the end years of Tun Dr Mahathir’s premiership? And I wonder how SSS campaign launched not long time ago can help to contribute?
In a nutshell, whatever the government of Malaysia is trying to do to improve Malaysian economics and confidence in the market and the people, please do it properly and make sure it can be understood by Malaysians. Some already confused with 1Malaysia concept, so please not let some more getting more and more confused with what NEM is trying to do and help Malaysians.
I do hope that I won’t hear something like “Tu la, siapa suruh tidak belajar tinggi-tinggi”.. and some will say “Memang kami tak faham, kamu yang belajar tinggi-tinggi patut bagi kami faham, bukan kami nak bagi kamu faham. Siapa yang belajar, siapa yang tak pergi sekolah?”
Perhaps I’m being rude.. but do the people involved in this draft of NEM need to told how some parts of Malaysia are having their life not as comfortable as you are? Do the people involved in this exercise need to be taught how to explain in simple words?
Questions on the street: Do you know what New Economy Model is? Are you aware of it?