Malaysian exports are likely to show further contraction in June as global demand remained weak and commodity prices continued to be sluggish.
A Business Times poll expects growth to contract by an annualised 6.93 per cent, while supported by a 4.48 per cent growth in the imports which will likely lead to a RM7.96 billion average trade balance.
The International Trade and Industry Ministry will release the data today.
OCBC Bank’s economist Gundy Cahyadi said recent data have clearly shown that there is a gap between the strength of export growth and that of industrial output growth.
“This indicates that domestic demand has managed to sustain its support on the overall economy fairly well.”
About 70 per cent of Malaysia’s manufacturing is still export-oriented, and thus, the economy needs stronger export growth to give it a boost.
“The recent trend in export growth where weakness is clearly the dominant theme is disconcerting, to say the least. Export growth remains under pressure from soft commodity prices and the sluggish state of the global economy.”
Gundy also said the recent weakening of the ringgit may help support export demand going forward.
“But we don’t expect to see a significant recovery in Malaysia’s export growth until closer to year-end.”
OCBC Bank also expects Malaysia’s gross domestic product growth to come in below five per cent this year.
Patricia Oh of AmResearch continues to envisage an expansion in the domestic economy, with improvements in the US as a growth catalyst driven by a boost in external demand during the second half of the year.
Advanced economies have been gearing up on industrial production in the recent months which has bolstered optimism for an uptick in global demand in the later part this year, she said.
“We expect the rebound in advanced countries to bode well for growth within Asia despite a softer outlook ahead for China.
“ Mainly, the sooner than expected recovery in the US and the relatively weaker regional currencies vis-à-vis US dollar will be supportive of global exports growth,” she added.
Malaysia has benefited from positive net exports with its major trading partners including the US, China, Japan and Europe.
“Owing to recent economic advancements in the US, Europe and Japan, we foresee an uptick in Malaysia’s export momentum.