Malaysia’s trade to remain resilient, stronger in next few quarters – Economist
27 May 2021
Malaysia’s trade is expected to remain resilient in April and pugnaciously strong in the next few quarters, growing between 25 to 45 per cent in the coming months, an economist said.
Juwai IQI Global chief economist Shan Saeed said the Malaysian economic outlook is strongly linked with the positive outlook for China, ASEAN and the United States (US) and would benefit from these countries’ growth.
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He said the Chinese economy is seen moving at a faster pace post-COVID-19 pandemic with domestic demand in the country remaining strong due to its dual circulation strategy.
“This is China’s strategic approach to adapting to an increasingly unstable and hostile outside world by placing a greater focus on the domestic market or internal circulation, and place less reliance on its export-oriented development strategy or external circulation without abandoning it,” he told Bernama.
He said with global economies opening up and ASEAN coming out of the pandemic situation, the region which is the largest trading partner with China would benefit more due to the regional proximity and strong commerce and economic ties.
“We expect ASEAN gross domestic product (GDP) to grow between 3.5 and 5.5 per cent in 2021,” he said.
He said Malaysia is expected to benefit from the strong demand for integrated circuits or semiconductors coming from China as the republic imports 10 per cent of semiconductor chips from here.
Shan said Malaysia would also benefit from the commodities bull run which has commenced especially rubber, palm oil, and liquefied natural gas (LNG).
“We continue to maintain our stance that Malaysia’s GDP will meander around three to four per cent with a higher upside potential premised on domestic demand, government support, and export landscape that would buttress the strong growth,” he said.
He said Bank Negara Malaysia (BNM) has played a key role in maintaining the structural stability of the ringgit to boost export orders and stability in the domestic market by making some solid tactical and strategic calls in the monetary landscape which is keeping the momentum going for the economy “With reserves at US$110 billion and strong control of monetary policy, BNM has played its card intelligently and strategically in the market, taking into account the global economic fragilities in the advanced economies,” he said.
He said the ringgit is expected to move at between 3.67 and 4.10 against US dollar in 2021.
On the global macroeconomic outlook, Shan opined that it would remain fragile and uncertain as many economies do not have the strategy or policy response to how to control and contain the pandemic situation.
“Many advanced economies are still struggling to get economic confidence and domestic demand back in the macro equation.
“Japan, Europe, and India would need to resolve their structural and COVID issues before thinking of economic growth outlook,” he added.
However, he said Asia and China are expected to come out of COVID-19 much stronger to achieve economic progression in the coming quarters.
Meanwhile, Putra Business School associate professor Dr Ahmed Razman Abdul Latiff said Malaysia’s trade performance for April, scheduled to be announced on May 28, is expected to continue showing positive growth.
He said this is based on the leading Index (LI) for the first quarter this year which has shown a continuous upward trajectory especially in March where it registered a 17.3 per cent growth.
“In addition, Malaysia’s manufacturing, motor vehicle sub-sector and commodity prices have seen positive sentiments in the first quarter as well.
“On top of that, both export and import unit values indices remained positive in March and expected to continue to do so in April,” he said.
The Federation of Malaysian Manufacturers (FMM), Malaysia Semiconductor Industry Association (MSIA), and Malaysian Rubber Glove Manufacturers Association estimated that Malaysia’s export for April 2021 will increase by 51 per cent.
The industry players said this was in line with healthy trade performance experienced in April 2021 by neighbouring countries, notably Singapore and Indonesia, which grew by double-digit at 34.7 per cent and 40.8 per cent, respectively.