Friday 29 Mar 2024
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KUALA LUMPUR (Aug 22): CGS-CIMB Research said while Malaysia’s July exports posted a strong performance, trade balance however posted a lower surplus of RM15.5 billion (June: RM21.9 billion).

In a note on Aug 20, the research house said it sees downside to exports ahead as commodity price moderated, palm oil faces stiffer competition, while demand for E&E may have peaked.

More downside to exports ahead

CGS-CIMB reiterated its message from the previous month — factors that supported trade performance in July are not likely to last.

“Indonesia cut its export levy for crude palm oil effective June to August 2022 in order to lower its oversupplied domestic market.

“As such, global demand might shift away from Malaysia temporarily.

“Already we have seen July palm oil export declining on a mom basis at -12% versus +9.5% in June, although the data does not account for seasonal effect,” it said.

3Q22 trade balance could face downward pressure

Looking ahead, CGS-CIMB said on the trade balance perspective, lower July trade surplus marks a soft start for 3Q22.

It said the concern is if the expectation of weaker export performance materialises, along with continued robust imports from the domestic recovery momentum, we could see a weaker goods surplus going forward.

“On the flip side, recovery in the services account following an increase in foreign tourist arrivals could provide a respite.

“For now, we still maintain our current account surplus forecast for the year at 1.7% of GDP (2023F: 2.1%),” it said.

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