KUALA LUMPUR: The strong 18.8 per cent export growth in October points to a healthy economy in the fourth quarter, said economists.
Large shipments of electrical and electronic products (E&E) for the fourth consecutive month and commodity products have supported external demand while the imports of intermediate and capital goods suggests that the gross domestic product (GDP) growth momentum remains healthy in 2017.
The Malaysian economy expanded by 5.6 per cent in the first quarter, 5.8 per cent in the second quarter and 6.2 per cent in the third quarter.
The Treasury has projected the economy to record a growth of between 5.0 and 5.5 per cent for 2017.
Singapore-based Nomura Research described the latest data as a ‘solid outturn’, saying it suggests external demand will remain a key source of support economic growth in the fourth quarter.
“The strong import growth by 20.9 per cent from 15.2 per cent in September was led mainly by imports of consumer goods (11.1 per cent) and core capital goods (excluding transport equipment) also surged by 23.9 per cent, both of which are indicative of robust domestic demand.”
Both exports and imports continued to perform favourably said AmBank.
“We expect the economy to continue performing strongly in the fourth quarter , with our preliminary estimates at 6.0 per cent.”
The research house is looking at a full-year 2017 GDP of 5.9 per cent, where growth will be supported largely by exports on the back of an improving external demand and the cheap ringgit.
The ringgit is trading at a discount to its fair value which it is projecting at 3.95 against the US dollar, based on analysis and 3.76 against the Real Effective Exchange Rate (Reer).
“The healthy growth trend from imports of intermediate and capital goods suggests that the GDP growth momentum remains healthy in 2017.”
It expects a 21 per cent full-year export growth despite envisaging slower exports in some degree in the fourth quarter due to a high base.
AffinHwang Capital Research said the rebound in export growth was also attributed mainly to higher exports of mining goods, in particular, exports of crude petroleum which rebounded strongly by 62.9 per cent in October, after contracting by 4.9 per cent in the prior month.
Both exports volume and average unit value rose significantly during the month and was supported by a higher global crude oil price, which trended above the US$60 per barrel level in the final week of October.
Exports of palm oil and palm-oil-based products reversed to positive growth of 7.9 per cent year-on-year in October, after declining for two consecutive month while exports of rubber products also rose by 30.6 per cent.
As for exports of manufactured goods, it noted that demand for thermionic valves, tubes and photocells, a main subcomponent under E&E products, remained strong, expanding by 28.9 per cent in October.
According to the Semiconductor Industry Association (SIA), global semiconductor sales continued to remain robust in the month of October, expanding by 21.9 per cent due to higher sales from US and Europe markets, it added.
Research houses like AffinHwang have projected export growth to slow next year due to the high base effect in 2017.
With the SIA projecting seminconductor sales to remain strong in 2018, the research house continues to expect higher exports of E&E products to continue to support economic growth, but at a slower pace.
2017 is set to become a good year for Malaysia’s trade, said Public Investment Bank Bhd.
It warned that the landscape could change in 2018 especially when the ringgit is set to move higher as importers have to weigh the impact of further Ringgit advancements.
“In our view, as long as the ringgit’s real effective exchange rate does not move much vis-à-vis regional peers, export numbers can remain robust,”it said, adding that net exports will otherwise take a backseat in driving the economy.