The Star Online (03/11/2018) - THE escalating trade war between the United States and China is bad news for global trade.

The government, in its economic outlook for 2018, has projected exports from Malaysia to expand 4.4% to RM976.45bil. Next year, the growth rate is expected to taper down to 3.9%. This is much lower than the previous year’s growth of 18.8%.

The country’s gross exports will continue to be driven by sustained demand for manufactured goods, which is estimated to grow by 6.6%.

Manufactured goods, which account for nearly 84% of total exports, are likely to be supported by continued expansion in the electronics cycle and favourable global industrial activities.

Exports from the mining sector is projected to rise by 1.4% this year. However, the agriculture sector would see a decline in exports, falling by 11.2%.

The contraction is mainly because of expected lower receipts from palm oil and natural rubber.

Imports-wise, Malaysia is likely to see a greater slowdown in growth quantum compared with exports. Gross imports are expected to rise only by 4% to RM869.89bil this year compared to 19.7% a year earlier.

The import of capital goods and consumption goods is projected to be up by 1.6% and 2.3% respectively. However, the import of intermediate goods is expected to contract by 4.6%.

Overall, the country’s trade balance is expected to improve by 8.2% to RM106.57bil this year.

Malaysia is likely to enjoy a current account surplus this year – despite a slight moderation – within the range of 2.5% to 3%. This is mainly because of higher goods surplus, even though the services and income accounts are expected to be in deficit.

As for 2019, gross exports growth is predicted to continue moderating to 3.9% at RM1.01 trillion. A rebound in commodity exports and the continuous demand for manufactured goods are expected to support the demand for Malaysian exports.

The manufactured exports are forecast to grow by 4% led by higher demand in several goods segments, such as electrical and electronics, chemicals and chemical products, petroleum products and the manufacture of metal, among others.

Exports from the mining and agriculture sectors are expected to grow by 3.9% and 5.4% respectively.

The country’s import growth in 2019 is forecast to inch up marginally by 4.1% to RM905.13bil, supported by steady re-export activity and the demand for intermediate goods.

Capital goods import is expected to rise by 2.9%, while the import of intermediate goods and consumption goods will likely improve by 4.2% and 3.1% in 2019.

Overall, the growth of Malaysia’s trade balance is anticipated to slow down to 2.6% compared to the expected growth of 8.2% in 2018.

Next year, the lower goods surplus and widening services and income deficits may likely narrow the country’s current account surplus slightly to between 2% and 3%.

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