Smaller contraction seen for Oct exports

KUALA LUMPUR: The country’s exports could have seen a smaller annual contraction in October compared to the preceding month against the backdrop of an improving global economic landscape, according to economists.

AmResearch Sdn Bhd senior economist Manokaran Mottain, who anticipates the country’s external sales to shrink at an annual rate of 10% in October, said local exports were supported by demand in major emerging economies China and India.

“Exports are improving to pre-crisis levels helped by demand in emerging economies like China and India,” Manokaran told The Edge Financial Daily over telephone yesterday.

Malaysia’s external trade figures for October are due for release today. The economist expects Malaysian imports to decline 12% from a year earlier.

Average estimates by analysts polled by Bloomberg indicate that the country’s exports in October would contract 10.5% from a year earlier.

Malaysia’s external sales fell by an annual pace of 24.2% to RM47.2 billion in September this year, the 12th consecutive month of decline, while imports contracted 20.2% to RM38 billion. In monthly terms, exports and imports dipped 1.1% and 0.7% respectively.

Amid the global economic downturn, the country’s external sales started to dwindle from October 2008 when exports contracted at yearly rate of 2.61% following a 15.04% growth seen in the preceding month.

The country’s top 10 export destinations for the nine months to September 2009 were Singapore, China, the US, Japan, Thailand, Hong Kong, South Korea, Australia, the Netherlands and India. These countries constituted RM279.8 billion or 70.9% of Malaysia’s exports during the period.

RHB Research Institute Sdn Bhd economist Peck Boon Soon is more optimistic, having predicted an 8.8% contraction in Malaysia’s October export and import figures. “This is more on the back of an improvement in the global economic scenario,” Peck said.

China and India have exhibited encouraging figures this year. China, with a 1.3 billion population, posted an annual 8.9% gross domestic product (GDP) expansion in the third quarter, the fastest pace in a year, helped by the country’s massive US$586 billion (RM2 trillion) stimulus package, and more lending.

India, with a 1.2 billion population, registered a 7.9% yearly GDP growth in the July to September period, its strongest in six quarters, helped by higher consumer spending, and private investment.

However, investors are also mindful of the fact that global policymakers may withdraw fiscal support as recovery takes shape and wonder if the private sector would be able to spearhead recovery.