Daily Express (09/03/2020) Kota Kinabalu:Palm oil shipment to India plunged by -85.3 per cent year-on-year but the drop in palm oil demand from India was partially taken up by Pakistan, up 111.8 per cent year-on-year.
Shortages of key raw materials due to the Covid-19 outbreak in mainland China with shipments being delayed or even cancelled in some cases heavily impacted manufacturing production.
While Malaysia’s trade surplus in January 2020 remained at a healthy RM12 billion, exports fell by 1.5 per cent year-on-year in January. At the same time, January’s imports fell 2.4 per cent year-on-year.
Ambank Group Chief Economist Dr Anthony Dass said that “Malaysia’s trade outlook remains challenging as impact from the Covid-19 which has disrupted global supply chain and shipping is likely to continue in the months ahead.”
“On that note, the 2020 GDP growth is more likely to be around 3.0 per cent with an upside at 3.8 per cent and a downside around 2.5 per cent,” he opined, as the downside risk on manufacturing activities remains high due to the Covid-19 impact that is expected to continue fuelling supply shortages for many imported inputs and dampening sales in key export markets.
“Added with a still weak consumer and business sentiments, and labour market, there is more downside risk on the first quarter of 2020 growth which is expected to be lower than the fourth quarter of 2019’s GDP growth of 3.6 per cent.
“However, the additional stimulus measures amounting to RM20 billion and the 25bps in OPR rate cut to now 2.50 per cent fell in line with our view, and should provide positive impetus to private consumption which is the anchor for growth and investment with exports complementing in 2020.
Senior officers of the Malaysian Industrial Development Authority (MIDA) led by MIDA Chairman Dato Abdul Majid Ahmad Khan and Sabah MIDA Director Wong Tiang Sing will be meeting members of the Federation of Sabah Industries this month here for discussion on current issues and challenges, including the future outlook for Sabah.
Dr Anthony Dass: “With the drop in global trade, i.e. exports and imports added with a still global tech down cycle plus weaker commodity prices, there is more downside risk on both our exports and imports.”
“It is partly reflected by the poor manufacturing activities shown by the manufacturing PMI which is still in the contraction region.”
The Purchasing Managers’ Index (PMI) is an index of the prevailing direction of economic trends in the manufacturing and service sectors. It consists of an index that summarizes whether market conditions, as viewed by purchasing managers, are expanding, staying the same, or contracting.
The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
In tandem with many other countries’ manufacturing PMI, Malaysia’s manufacturing PMI in February 2020 deteriorated further to 48.5 (48.8 in January), impacted by supply disruptions due to the Covid-19 outbreak.
“The drag on the economy could continue into the second quarter of 2020. Much depends on the severity of the Covid-19 impact that is already disrupting global supply chains and shipping. Thus, another 25bps rate cut is still on the table should there be a need to support private expenditure and help ease upwards pressure on non-performing loans. Room for lowering the SRR by 50-100bps remains,” Dr Anthony Dass opined.
Meanwhile, the Royal Malaysian Customs Department had notified Federation of Sabah Industries of the impending implementation of the ‘uCustoms’ for Kota Kinabalu and Sandakan Ports effective from March 16, 2020 that started on March 5, 2020 at Port Klang as a pilot project.
‘uCustoms’ is touted as a fully intergrated , end to-end, Customs modernization solution that delivers ‘Single Window’ for goods clearance. The ‘u’ stands for ‘ubiquitous’ which is defined as ‘present, appearing or found everywhere’. The benefits of uCustoms are consistent operating procedures under a National Single Window promising cost savings on transactions due to automation of manual processes, with ease of information/data sharing that enable any staff involved to work remotely.
According to Bank Negara Malaysia, the Monetary Policy Committee (MPC) decided to reduce the Overnight Policy Rate (OPR) by 25 basis points to 2.50 per cent as the ongoing Covid-19 outbreak has disrupted production and travel activity.
This has also led to greater risk aversion, resulting in tighter financial conditions and a resurgence in financial market volatility. Downside risks to the global growth outlook have increased, particularly in the near term.
The reduction in the OPR is intended to provide a more accommodative monetary environment to support the projected improvement in economic growth and price stability.
Bank Negara stated that growth, particularly in the first quarter, will be affected by the Covid-19 outbreak primarily in the tourism-related and manufacturing sectors. The weakness in the agriculture sector is also likely to persist in the first quarter.
For 2020, private and public sector activities will be supportive of growth. Household spending is expected to grow at a slower pace amid moderate employment and income growth.
Bank Negara deemed that there are key downside risks, mainly stemming from the evolving nature and prolonged impact of the Covid-19 outbreak, and continued weakness in commodity-related sectors.