Faster ETP needed if exports slow further, say economists
By Yow Hong Chieh and Lee Wei Lian, The Malaysian Insider
KUALA LUMPUR, Nov 9 — The Najib Administration may have to step up implementing the Economic Transformation Programme (ETP) to ensure economic growth if export growth falls further following a sharp slowdown in September, economists said.
The Ministry of International Trade and Industry (MITI) announced on Tuesday that exports grew by only 6.9 per cent, compared with September last year, after eight straight months of double-digit expansion.
Malaysia’s imports grew by 14.6 per cent, and the country recorded a trade surplus of RM7.01 billion in the same month.
Kenanga Investment Bank economist Wan Suhaimie Wan Saidie said that the government will “more likely than not” speed up the ETP time line to boost domestic spending in order to compensate for lower projected export earnings.
“And if things are still relatively good, I’m not surprised if they will call for a snap election to make use of whatever’s left of the economic recovery, because it’s quite uncertain going forward,” he said.
He added there was hope for increased domestic demand as the drop in capital good imports was not as alarming as expected.
“We saw MAS (Malaysia Airlines) ordering more planes, shipping companies ordering more ships. That goes to show that some of the companies are still relatively bullish about the outlook,” he said.
“Might as well you spend now, then when the recovery comes around they will reap the benefits instead of playing catch-up.
Wan Suhaimie said it was possible the expected slowdown in export growth in coming months will push GDP for the second half of this year below 5 per cent.
He added that it “remains to be seen” if the government’s targeted 7 per cent annual GDP growth can be achieved.
RAM Holdings chief economist Dr Yeah Kim Leng too said that if growth momentum dropped too sharply, one possible response would be to bring forward “big-ticket” ETP projects that had been announced for next year.
“Like the MRT and some of those big integrated development projects like the RRIM (Rubber Research Institute of Malaysia) as well as the financial district and then the controversial 100-storey tower,” he said.
He added that if export growth contracts, there might be “some clamouring” for government measures to help the export sector but did not expect to see such lobbying for the rest of the year at least.
However, Yeah did not think export growth will enter negative territory as the US Federal Reserve recently announced it will purchase some US$900 billion (RM2,782 billion) in long-term Treasury bonds to stimulate the economy of Malaysia’s third-largest trading partner.
“Given that the US is mounting a second QE (quantitative easing)… that should also help maintain some form of confidence,” he said.
Yeah also pointed out that the smaller expansion seen in September was in line with expectations, given the combination of advanced economies slowing, low base effect and the end of the inventory-rebuilding cycle.
“That also suggests that the export growth now has moved to its normal growth – high single-digit growth that we saw in pre-crisis years… Our export growth will ease but will not experience a sharp decline,” he said.
Yeah added that he expects Malaysia to book 7.4 per cent growth in GDP this year.
However, CIMB Investment Bank chief economist Lee Heng Guie said that, while slower export growth was expected, the rate of deceleration was faster than projected.
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