'Highest surplus means weak domestic economy' - Kian Ming to Azmin

 

Former deputy minister for international trade and industry Ong Kian Ming has dismissed current minister Azmin Ali's celebration of the “highest ever” trade surplus in the nation's history in 2020, saying it happened due to weak domestic demand.

"This was one of the highlights of the media statement by International Trade and Industry Minister Azmin Ali on Jan 30 but in reality, this 'achievement' is nothing to be proud of."

"In fact, it points to a very weak domestic economy, which is likely to remain lacklustre in 2021. Hence, there is no need to be over-optimistic about ever high trade surpluses including in 2021," said Ong in a statement today.

The Bangi MP said that the main reason why Malaysia was able to increase its trade surplus by 26.9 percent from RM145.7 billion in 2019 to RM184.8 billion in 2020 was that total imports experienced a large decrease of 6.3 percent or RM53.2 billion from RM849 billion in 2019 to RM 796.2 billion in 2020.

"It was encouraging that Malaysia’s total exports managed to weather the Covid-19 economic uncertainties in 2020.

"But it would be wrong to ‘boast’ about Malaysia’s highest-ever trade surplus which was caused by a large fall in our imports. Lower imports means that the domestic economic demand was very weak in 2020," said Ong.

He said this meant fewer purchases at the local shopping malls of both imported and locally produced goods, which had a negative impact on our retailers.

"Lower demand for imports is also a leading indicator of weak local economic conditions in the near future. For example, lower imports of machinery and construction materials such as iron and steel mean that the construction industry is likely to remain weak in 2021."

Malaysia’s overall trade (exports plus imports) decreased by RM67.3 billion or 3.6 percent from RM1.845 trillion in 2019 to RM1.777 trillion in 2020. Malaysia’s total exports in 2020 decreased by 1.4 percent or RM14.1 billion compared to 2019.

"A healthy economy should experience growing exports and also imports, which are growing at around the same level as exports (and perhaps slightly more).

"While trade under the Pakatan Harapan government did shrink by 2.5 percent in 2019, this was not accompanied by negative GDP growth," said Ong.

Taking a dig at Azmin's misplaced exuberance, he emphasised that the GDP grew by 4.3 percent under Harapan in 2019 while it is expected to contract by at least 4 percent in 2020 under the Perikatan Nasional (PN) government.

With the ongoing movement control order (MCO 2.0), local demand in Q1 2020 will continue to remain weak, predicted Ong.

"So don’t be too happy when you see the government announcing another 'highest ever' trade surplus in the next few months.

"We are in for a challenging 2021 despite the optimistic GDP growth projection by the Ministry of Finance of between 6.5 and 7.5 percent for the year," he said. - Mkini