Public Investment Bank Forecasts Trade Could Make Further Recovery

KUALA LUMPUR, Nov 30 (Bernama) -- Public Investment Bank (PIB) has forecast that trade could make further recovery based on the recent breakthrough in COVID-19 vaccine development. PublicInvest Research, PIB's research division, said the manufacturers are set to produce up to 1.3 billion doses of vaccine in 2021, covering about 17 per cent of the global population and this will be the likely catalyst that could trigger a rebound in commodity, trade and capital markets, though a full global recovery may take up to two years given the depth of the current crisis. "Emerging markets are expected to drive the growth in global trade driven by recovery in demand from the advanced economies, consistent with the improvement in labour markets amid a rebound in economic activities post COVID-19.  "Manufacturing goods, especially electrical and electronics (E&E) and agriculture products are expected to be among the first to benefit from the revival in global demand," the research house said. The research note also said trade may continue to recover in the near term though its full turnaround may be weighed by several headwinds, among which are OPEC+ steep output cut until the second quarter of 2021 (2Q21) and economic challenges in advanced and major economies due to COVID-19 headwinds. Other factors are the resurgence in new domestic COVID-19 cases that may push consumers to remain cautious and continue preserving capital, as well as cautious business sentiment that could affect capacity expansion and capital goods imports.  "Some governments may revert to lockdown measures, though only as a last resort, especially when COVID-19 remains a serious issue which shows no sign of abating. All these risk factors may put a drag on trade performance in the near term," it said. Meanwhile, trade surplus remained impressive after rising by 25.9 per cent year-on-year (yoy) to RM22.1 billion in October, which is also the second highest for the year.  "Year-to-date (YTD) surplus that jumped by 16.3 per cent on a yoy basis to RM147.0 billion could improve further driven by full economic openings across ASEAN and China," the research said.  It said exports that moderated to +0.2 per cent yoy in October (September: 13.6 per cent) was held up, among others, by steady manufacturing (October: +2.5 per cent) and agriculture (October: +28.7 per cent).  This was offset by lacklustre mining momentum (October: -47.2 per cent) which registered another month of decline, its eight straight month of contraction.  Liquified natural gas (October: -57.7 per cent) and crude petroleum (October: -44.8 per cent) delivered another letdown which was compounded by a sharper decline in condensate and other petroleum oil (October: -95.1 per cent). "The sluggish momentum by petroleum-related products will continue until year-end and into 2021 amid OPEC+ ongoing production cut (August-December 2020: 7.7 million barrels per day (mbpd); January-April 2021: 5.8mbpd)," it said. The corresponding increase in OPEC+ output beginning August and the serious COVID-19 situation in advanced and major economies may put a cap on oil prices nonetheless, already reflected in weak YTD Brent (-33.9 per cent yoy; US$42.4 per barrel).  "Oil price recovery will be further weighed by weak global growth projection for the year (2020 global gross domestic product: -4.9 per cent) and gradual recovery next year," it said. In addition, imports that registered a bigger decline (October: -6.0 per cent; September: -3.6 per cent) were pulled down, especially by intermediate goods (October: -6.1 per cent) and capital goods (October: -17.1 per cent) though offset by steady consumption goods (October: 6.5 per cent) activity.  "This will be intermediate goods’ seventh straight month of decline since April. This may subsequently weigh on our re-exports and therefore exports momentum especially when re-exports contribute ~19 per cent of our exports. "Capital goods imports remained affected by a large decline in transport equipment, industrial (October: -26.5 per cent), pointing to an evidence of a delay in capacity expansion," it said. Intermediate goods, on the other hand, were affected by a sustained drop in fuel and lubricant -- primary (October: -17.8 per cent) and fuel and lubricant -- processed (October: -21.9 per cent).  "On a monthly and seasonally-adjusted basis, imports ticked 2.9 per cent faster and this is a rebound against +1.6 per cent in September," it added. -- BERNAMA