Published May 12, 2009

KL economy looks like bottoming

March export drop not as steep as market expected

By S JAYASANKARAN
IN KUALA LUMPUR

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THE latest figures coming out of Kuala Lumpur seem to indicate an economy that is slowly, but surely, bottoming out.

Data released by the government last week revealed that exports in March fell 15.6 per cent year-on-year compared to the market's more pessimistic forecast of minus 17.4 per cent.

Economists took that as a good sign. For one thing, the pace of the export decline was slowing: in February, for example, exports contracted by almost 16 per cent.

Meanwhile, on a month-to-month comparison, both exports and imports jumped, by 10 and 13 per cent respectively.

The increase was mainly due to an increase in demand for electrical and electronic products, crude oil and crude palm oil mostly from the United States and every Asian country except Japan.

Things could get better. 'We expect the rate of decline to continue tapering off from now on,' said the Arab-Malaysian banking group in a report released yesterday, 'given a weaker currency as well as improvements in commodity prices as well as stronger signs of recovery in China and India'.

Morgan Stanley put it in a regional perspective in a report over the weekend. 'Overall, March trade trends have been in line with those observed in other economies in the region with the improvement in March percentage year-on year compared with the January-February average,' the American securities firm noted.

Indeed, the optimism has begun rubbing off on Malaysia's manufacturing sector. Over the weekend, Mustafa Mansor, the president of Federation of Malaysian manufacturers, said that rising demand had created 27,000 jobs in the manufacturing sector.

The businessman said that he was 'encouraged' by rising demand for Malaysian products especially in the electrical, electronic and chemical sectors, adding that the ports were getting 'increasingly busy'.

The latter comment has been reinforced, most notably through G Gnanalingam, the controlling shareholder of Westport, who said last month that throughput at his port had increased 'substantially'.

Even so, Mr Mustafa's comments seemed directed towards April and May. In the first quarter, however, things were decidedly grimmer.

Over the weekend, central bank governor Zeti Akhtar Aziz said in Singapore that Bank Negara would revise Malaysia's growth forecast amid a worse-than-expected slump in exports.

'The export contraction was much greater than we originally envisaged,' said Ms Zeti in comments published by Bloomberg yesterday. 'We will be revising our numbers as well. The important thing is that the domestic sector continues to be strong.'

Currently, Bank Negara forecasts that real gross domestic product would grow between minus-one and one per cent this year.