JP Morgan: Malaysia December Trade Surplus Widens On Strong Exports

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Malaysia’s December trade balance recorded a larger surplus, beating expectations at US$7.4 billion (J.P. Morgan: US$6.6bn, Consensus: US$5.3bn). In seasonally adjusted terms, it reached US$6.4 billion said JP Morgan in its report on Malaysia’s economic outlook.

The global firm added that exports hit a record high in December as COVID-19 related exports disruptions continue to abate December. Overall exports expanded a further 1.6%, due mainly to a solid expansion in tech-related exports, up 9.1%. Meanwhile, overall imports declined 2.2%, with the bulk of the contraction due to a fall in intermediate goods imports, down 8.7%.

As intermediate goods imports typically feed into tech exports, this could imply some downside risk to the near-term tech-related exports outlook. Alongside the resumption in economic activity, investment goods imports extended their November gains and were up 3.0%m/m last month.

Monetary policy normalisation to begin in 3Q22. While the emergence of the Omicron variant domestically could raise near-term uncertainties, JP is maintaining its current forecasts at this juncture as Malaysia’s high vaccination rates may imply a higher tolerance for future outbreaks, in turn reducing the need for broad mobility restrictions. Looking ahead, it expects labor conditions outside the goods-producing sectors to catch up next year alongside the broader resumption in services, in turn guiding core prices higher, albeit at a gradual pace.

JP continues to expect monetary policy tightening of 25bp each in 3Q22 and 4Q22.

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