Malaysia Sep export growth likely to decline, overall growth outlook remains cloudy

Export growth in Malaysia is expected to have declined during the month of September, with the major drag from crude oil, palm oil and LNG, while key electronics export is still on a tepid recovery path. Overall growth outlook remains cloudy amid the strong external headwinds.

Export growth is expected to register a decline of 1.6 percent y/y, down from a modest expansion of 1.5 percent in the previous month. Import growth will likely clock a mild dip of 0.4 percent, which will bring overall trade surplus to MYR 8.7 billion.

That explains the pre-emptive move by the central bank in July to lower interest rates despite an almost unanimous market expectation for a status quo. This policy move is deemed to be an 'insurance cut' against potential downside risk to growth and inflation.

Meanwhile, the benign inflationary pressure at present and the downside risk on growth will likely prompt the central bank to ease monetary policy again later this month. And for that, a sub-par export performance today could well tip the scale towards that, DBS reported.