PETALING JAYA: An economist believes falling Malaysian trade figures are an indication of a looming global recession, and says the federal government should begin making preparations to meet the challenge.
Barjoyai Bardai of Universiti Tun Abdul Razak said the dip in Malaysian export and import figures for February were in line with a contraction in global trade.
Another economist, Yeah Kim Leng of Sunway University Business School, said the decline in global trade had been caused by the US-China tariff war and increases in the US interest rate.
Malaysia’s exports were 5.3% lower than a year ago at RM66.6 billion, the lowest value since August 2016, mainly due to lower exports of refined petroleum products, crude oil, palm oil, and palm-oil based products.
Imports also fell by 9.4% to RM55.5 billion in February, the lowest since May 2016.
Bardai said exports had been falling over several months, with a parallel drop in imports.
An over-reliance on commodity exports left Malaysia vulnerable, he said, and urged the government to put greater emphasis on the service sector.
“There is a need to diversify our revenue base, for now. I believe the government should spend more to bring in more tourists” as well as provide incentives to boost other services industries such as logistics.
Sunway’s Yeah said Malaysia’s export-oriented industries would be affected by the slowdown in global demand because of the country’s position in the global manufacturing supply chain and as a commodity exporter.
However, as long as businesses were prepared for the cyclical slowdown in export sales, there should not be any worry about shutdowns and retrenchments.
“It will take a more severe and prolonged drop in exports before employees should become concerned about their future prospects, and for the government to roll out counter-measures.”
Imports could have dropped because of lower domestic demand, Yeoh said, possibly due to weaker consumer and investor sentiments and erosion in purchasing power.
The government should step up overseas trade and investment promotion programmes especially in non-traditional markets, enhance administrative efficiency and reduce the regulatory burden on the private sector.
“All these efforts will increase the resilience of the economy against the export downturn.”