Drop in imports due to weaker ringgit, battered stock market, says economist

Economist Hoo Ke Ping says the weaker ringgit has made it more expensive to import goods. (Bernama pic)

PETALING JAYA: An economist has dismissed a deputy minister’s suggestion that the drop in imports in February was due to the Chinese New Year celebrations, saying it was more likely a continuation of the trend in November and December last year.

Speaking to FMT, Hoo Ke Ping attributed this to the weaker ringgit and battered stock market.

Deputy International Trade and Industry Minister Ong Kian Ming recently said it was too early to draw conclusions on the recent trend of falling import numbers.

In February, imports fell by 9.4% to RM55.5 billion, the lowest since May 2016.

Ong said the February numbers showed a year-on-year slowdown, noting that Chinese New Year this year fell on a Tuesday and Wednesday compared to Friday and Saturday last year. He said many factories closed down for the entire week, resulting in reduced productivity.

But Hoo said this was unlikely. He said on a month-on-month basis, imports had dropped in November (3.5%) and December (5.4%), increasing 1.4% in January before dropping 24.8% in February.

He said the ringgit’s decline since May had made it more expensive to import goods, thus pushing up prices.

“The consequences are reflected in lower domestic sales figures across most sectors, as well as the drop in business confidence,” he added.

Hoo also said the value of Malaysians stocks had plummeted, affecting the country’s wealth.

Although a relatively small group of people hold shares in the stock market, a majority of them are businessmen and those who consume a lot as they have high levels of disposable income, he said.

“These are people who buy expensive cars, go on trips, make expensive purchases, eat out frequently, and so on.

“As a lot of their wealth is gone, they are spending less. This is also why you are seeing imports drop, be it for their business or personal consumption. They are cutting back on spending.”

He also voiced concern over the stock market’s failure to rebound, unlike those in other countries.

He attributed this to lower investor confidence due to flip-flops on policies, a lack of a clear economic plan, and concern over talk of attempts to remove Dr Mahathir Mohamad as prime minister.

“This gives the impression of uncertainty, which is why I think our stocks haven’t rebounded.”

Hoo’s comments follow a report by Bloomberg yesterday that the Bursa Malaysia Index is down amid a rally in global equities.