Trade surplus near decade-low on strong home demand

July 04, 2012

Containers are seen at North Port in Port Klang, January 8, 2009. — Reuters picKUALA LUMPUR, July 4 — Malaysia posted its smallest monthly trade surplus in nearly 10 years in May, underscoring strong domestic demand and economic growth that have kept imports rising at a faster pace than exports.

The country reported today a trade surplus of RM4.6 billion in May, almost halving from RM8.5 billion a year earlier. It was the smallest for any month since July 2002, when the surplus was RM4 billion.

The May 2012 trade surplus was below the median forecast of RM7.6 billion by 16 analysts polled by Reuters. Exports were up 6.7 per cent, above the median forecast of 5.5 per cent while imports surged 16.2 per cent, compared with an 8.5 per cent forecast.

Malaysia’s strong domestic demand has kept its economy insulated, for now, from the global slowdown rooted in the euro zone debt crisis and declining growth in key commodity consumer China.

In May, Malaysia’s exports to China were up 1.4 per cent from a year earlier while they rose 10.2 per cent to the US. Exports to the European Union were down 3.2 per cent year-on-year.

May’s 16.7 per cent jump in imports reflected strong demand for capital goods after Malaysia announced a slew of mega-projects in the oil and gas as well as transportation sectors, including the RM36.5 billion  MRT project.

“The robust import growth number is definitely a positive for growth prospects, while the negative impact from the flows perspective is probably limited, given that Malaysia’s current account is still relatively healthy,” said Gundy Cahyadi, an economist at OCBC Bank in Singapore.

Cahyadi said it remains uncertain if Malaysia’s domestic economy can remain robust if there is not a stronger rebound in global demand.

May’s 6.7 per cent rise for exports showed how Malaysia depends on strong Asian demand for liquefied natural gas and petroleum products to shore up sluggish growth in electronic shipments. LNG exports were up nearly 41 per cent, while those of electronic products rose only 1.1 per cent.

Malaysia’s economy grew at an annual pace of 4.7 per cent in the first quarter of 2012, slowing from the previous three months as firm domestic demand helped offset an export drop. — Reuters