Malaysia trade balance hits multi-year low at MYR3.3b

Here's what to blame.

According to DBS, trade balance has been falling on strong domestic growth. In fact, it hit a multi-year low of MYR 3.3bn, a sharp drop from MYR 8.2bn recorded in the previous month.

The most recent decline in trade balance came on the back on a massive surge in import despite an improving export performance.

Here's more from DBS:

Export growth rebounded to 3.5% YoY, up from a contraction of 5.8% in the previous month. But imports surged 16% in the month, from a slide of 6.5% previously.

A ramp-up in government projects and investments ahead of a general election, on top of a buoyant labour market are the reasons why imports have outpaced exports so significantly, resulting in the sharp drop in the trade surplus.

In addition, apart from the recent drop, which could prove to be transient in nature, the point to note is that a pronounced declining trend on trade balance is clearly visible.

This has much to do with the strong domestic growth witnessed over the last 2 years and it mirrors the trends seen in some regional countries such as Thailand and Indonesia. Unsurprisingly, external demand has been weak and domestic growth has been the key engine keeping these economies afloat.