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Malaysia’s trade expected to recover in 2021 — Investment banks

Malaysia’s trade expected to recover in 2021 — Investment banks

02 Feb 2021

KUALA LUMPUR, Feb 2  – Malaysia’s trade is expected to recover in 2021 backed by a recovery in global demand, especially for agricultural and manufactured goods, as COVID-19 threats recede following a massive global vaccination programme.

In its Economic Update today, Public Investment Bank Bhd (PIVB) said there would also be sustained global demand for information technology products amid a pandemic condition that increased demand for devices such as computers and tablets for home-based work and learning. 

A global 5G network transition by 2025 may in turn underpin a surge in demand for 5G-enabled products, it said. 

However, PIVB said trade may continue to be weighed down by the steep output cut by the Organisation of the Petroleum Exporting Countries and its oil-producing allies (OPEC+) until at least the second quarter of 2021, and economic challenges in advanced and major economies due to COVID-19 headwinds especially in first half of this year.

Other possible hampering factors are a resurgence in new domestic COVID-19 cases that may push consumers to remain cautious and continue preserving capital as well as the uncertainty caused by the US-China second trade negotiations, which could begin as early as this quarter.

“Notwithstanding that, 2021 is expected to be a better year amid a removal of the single largest drag to growth, the COVID-19 pandemic, though growth may re-accelerate only in the second half of the 2021,” said PIVB. 

The bank noted several positive economic indicators, including the December 2020 trade surplus. “It (the surplus) remained impressive after surging by 64.9 per cent year-on-year to RM20.7 billion in December 2020, pushing full-year surplus to RM184.7 billion, the highest on record, compared to RM146 billion in 2019,” it said.

It added that trade surplus may remain sanguine in 2021 driven by full economic openings across ASEAN and China as well as nascent global economic recovery due to rapid COVID-10 vaccination programmes.

However, this may be offset by the expected turnaround in imports, as well as uncertainty and risks from US-China second trade deal, it said.

Meanwhile, Maybank IB Research in its note echoed the view on a global economic recovery that would boost Malaysia’s trade performance.

It said both exports and imports were expected to rebound by 6.0 per cent and 7.0 per cent, respectively, with a trade surplus of RM187.8 billion in 2021. 

In 2020, both exports and imports contracted for a second consecutive year — by -1.4 per cent (2019: -0.8 per cent) and -6.3 per cent (2019: -3.5 per cent), respectively. 

Source: Bernama

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