Source: The Edge
Malaysia registered a trade deficit of RM3.5 billion in the month of April this year — its first monthly deficit in over 22 years since October 1997 — following the Covid-19 pandemic outbreak that disrupted supply chains worldwide.
The deficit that comes after 269 consecutive months of surplus is due to a higher contraction in exports, which sank 23.8% year-on-year to RM64.9 billion — its steepest decline since September 2009 — compared with the 8% y-o-y fall in imports to RM68.4 billion.
Total trade for the month was at RM133.34 billion, down 16.4% y-o-y from RM159.50 billion. Compared with March, trade fell by 9.9% while exports declined by 19%, according to a statement from the Ministry of International Trade and Industry (MITI). Imports saw a marginal 0.9% increase.
The fall in April's exports was led by a 23.4% decline in manufactured goods to RM55.5 billion — which represented 85.5% of total exports for the month. The contraction was due to lower exports of electrical and electronic products, manufactures of metal, machinery, equipment and parts, petroleum products, as well as optical and scientific equipment.
Exports of agriculture goods (7.2% share of total exports) decreased by 13.8% y-o-y to RM4.7 billion due to lower exports of sawn timber and moulding, while exports of mining goods (7% share) dropped by 31.6% y-o-y to RM4.56 billion, following lower exports of liquefied natural gas (LNG) and crude petroleum.
During the month, trade with Asean contracted by 27.9% y-o-y to RM30.4 billion, while trade with China fell a marginal 1.5%. Trade with Asean represents 22.8% of Malaysia’s total trade, while China's represents 19.7%.
Malaysia’s trade with the US (8% of total trade) fell by 19.6% y-o-y to RM10.67 billion, while trade with the European Union (EU) (7.1% of total trade) sank 33.3% y-o-y to RM9.42 billion. Trade with Japan (6.4% of total) declined 22.2% y-o-y to RM8.59 billion.
Senior Minister and Minister of International Trade & Industry Datuk Seri Mohamed Azmin Ali said the declines in both exports and imports are expected, given most countries around the world were under some form of lockdown to contain the spread of Covid-19.
"This has caused major disruptions to the manufacturing activities and movement of goods globally. Nevertheless, exports of some products such as iron and steel, rubber gloves and refined palm oil recorded increases.
"Malaysia's exports are expected to improve in the coming months, as the government allowed more industries to resume operations and at full operating capacity since May 4, 2020. Similarly, companies in other countries are also ramping up their business operations. This will boost trade activities between Malaysia and other countries", he added.
For the first four months of 2020, Malaysia’s trade dropped 3.5% y-o-y to RM573.75 billion from RM594.67 billion, following lower trade recorded with Thailand, Singapore, Hong Kong, Germany, India and Vietnam. Higher trade was registered with South Korea, Indonesia and the US.
"Exports during the period registered a decrease of 5.5% to RM303.61 billion and imports declined marginally by 1.2% to RM270.14 billion. Trade surplus was valued at RM33.47 billion, declined by 29.9% compared to the same period of 2019," MITI said.
In a separate statement earlier, the Statistics Department's chief statistician Datuk Seri Dr Mohd Uzir Mahidin said the number of transactions fell to 11.7 million for the period of January to April 2020, compared with 14.3 million for the same period last year.
In a separate note, MIDF said April's trade deficit is the largest ever recorded and will contribute negatively to economic growth in the second quarter of the year, especially as the quarter will have to factor in almost two months of the MCO.
“Malaysia had one full month of MCO in April and the conditional MCO in May, hence exports performance is expected to deteriorate in 2Q20. [For the full year] we reiterate that exports growth will contract further in 2020 at 8.3% y-o-y,” MIDF said.