PETALING JAYA: A further reopening of economic activities and the continued expansion in export of goods will help drive a wider surplus of Malaysia’s current account balance.
The Statistics Department said Malaysia’s current account balance recorded a surplus of RM15.2bil in the final quarter of 2021 despite prolonged nationwide restrictive measures.
This is driven by the exceptionally high net exports of goods with a double-digit growth in prices of commodities.
The positive performance prompted MIDF Research to upgrade its current account surplus to gross domestic product (GDP) ratio estimate for this year to 3.5%.
“In view of the expected rebound in Malaysia’s GDP growth, we expect the relative size of the current account balance to increase 3.5% of GDP this year (2021: 3.5% of GDP) from our initial expectation of 3.1%.
“The sustained surplus will be supported by continued expansion in exports of goods driven by manufactured goods and commodity-related products.
“As more domestic economic activities reopen, we expect import growth to record higher than export growth this year, at 5.1% versus 4.5%,” the research house said in a recent report.
On the services account, MIDF foresees a smaller deficit in the trade of services for 2022, thanks to the proposed reopening of international borders.
Meanwhile, demand for foreign services from the trade-oriented and construction sectors is likely to expand modestly.
In the fourth quarter of 2021, the services account recorded a higher deficit of RM15.5bil compared to a deficit of RM15.2bil in the third quarter, dragged down mainly by the travel segment.
“Traditionally, the travel segment will record higher inflows than outflows. However, the pandemic has flipped the table.
“With the reopening of domestic economic activities and more leeways given to the fully vaccinated, we saw outflows of travel segment increased to RM4bil in Q4 ’21, the highest since Q2 ’20, possibly due to Malaysians traveling to other countries.
“We expect the travel segment to record a smaller deficit in 2022, particularly with the gradual reopening of international borders. As for other services components, we do not observe any significant changes throughout the pandemic years,” MIDF added.
Notably, the National Recovery Council has recommended that the government fully reopen international borders on March 1.
However, MIDF opined that the borders would not be fully reopened in the first half of the year given that the Health Ministry has forecast daily infection cases to peak at 22,000 by the end of March.
Additionally, vaccine rollout for children age five to 11 was only started in February and may take at least 1.5 months for the group to be fully-vaccinated.
“Hence, we foresee June 1 as the earliest date for Malaysia to reopen its international borders amid the flattening curve of daily infection rate and higher two-dose vaccination rate as well as booster recipients.
“For 2022, we forecast services account deficit to GDP ratio to improve from minus 4% in 2021 to minus 3.6%. The travel segment should record a smaller deficit size of minus 0.8% this year (2021: minus 0.9%),” the research house said.