Malaysia exports will continue to grow: Economists

EXPORTS will continue to grow at a double-digit pace in June, but economists have warned that a soft global economy means there will be less demand for Malaysian goods in the coming months.

A Business Times poll expects Malaysian exports to grow 19.97 per cent year-on-year, imports by 26.41 per cent and the trade balance to average RM8.09 billion.

The International Trade and Industry Ministry will release the data today.

Citi economist Kit Wei Zheng said exports will likely grow in June when compared with May.

"Although we still expect exports to register robust double-digit growth, the pace is likely to slow down in line with our expectations that economic growth has peaked in the first quarter."

Growth in crude palm oil prices in June could mean that commodity exports would be higher.

While imports are expected to expand in double digits, the imports of intermediate goods could be a drag, he said.

Intermediate goods are bought by local manufacturers to make finished products that are then exported. This is why their imports are an indication of future exports.

However, consumer goods imports should still enjoy robust growth on the back of recovering domestic demand.

DBS Bank economist Irvin Seah expects to see a healthy set of numbers for June but expects the pace of growth to slow in months ahead.

Although domestic economic conditions were expected to be buoyant in the coming quarters, other countries are not reporting good news.

"A sub-par recovery in the US, slowdown in eurozone as well as an Asia that is due for some soft landing are strong reasons to suggest a weaker external demand and export sales ahead."

Alvin Liew of the Standard Chartered Bank agreed, saying problems in Europe and easing Chinese appetite, amidst the backdrop of high employment and weaker consumer sentiment in the G3 markets (Europe, US, Japan) could be reasons for the moderation.

With imports growth likely to outstrip exports in June, he said the trade balance is likely to be lower at RM5.5 billion. The last time it fell below the RM6 billion mark was in April 2007.

By Rupa Damodaran