Malaysia's August trade surplus pegged to hit MYR 3.4b

Import growth to post significant improvement.

According to DBS, marginal improvement is expected for Malaysia's Aug13 trade balance. The headline export growth is expected to post an expansion of 5.3% YoY. But import growth will stay significantly stronger at 13.7%. That makes for an overall trade surplus of MYR 3.4bn, which is a marginal improvement from MYR 2.9bn from the previous month.

Here's more from DBS:

Weaker currency is undeniably helping to narrow the gap in the external balance. The ringgit has depreciated by about 2.7% from the previous month and about 5.2% from the same period last year versus the greenback.

That will help to boost exports and soften importsto some extent. But underlying domestic demand is still strong. That explains why the government has to rationalise the Economic Transformation Programme to focus on projects that have lowerimport content.

Ultimately, the economy has to grow slower. Amid sluggish external demand, domestic growth has been keeping the economy afloat over the last few years. Such a strategy is never going to be sustainable especially when it is coming mainly from the fiscal coffer.

To this end, policymakers have been making the necessary adjustments in their growth strategies and the risk on the trade balance will likely dissipate with the gradual cooling in the domestic engines.