Out of the 14 economists polled, 10 had forecast a contraction.
Alvin Liew Standard Chartered:
"Malaysia's October's exports grew by a significantly slower 1.3%y/y, from 6.9% in September. But this was still better than our initial expectation for the first y/y contraction in 2010 (our forecast was -0.5%). And as expected, imports expanded at a slower pace of 12.5%y/y in October from 14.6%y/y in September. And while growth in imports still outstrips that in exports for October, Malaysia remains in a trade surplus position, albeit a smaller at MYR 6.85 bn (down from MYR 7.5bn previously).
"The magnitude of easing in October reignites some concern on Malaysia's export outlook and it certainly reinforces the view that the pace of Malaysia's GDP growth is moderating in Q4-2010 and going into 2011.
"More importantly, exports to key export markets like US and China contracted for the second straight month by 10.8%y/y and 6.7% respectively, (worsening from 4.4%y/y and 3.8%y/y in September) raising concerns of flagging demand from key markets. (China is Malaysia's biggest exports destination outside of ASEAN) However, having said that, we do note that China's latest PMI reading turned out to be stronger than expected, and their appetite for Malaysian exports could improve next month.
"We expect GDP growth to ease to 5.1% in 2011 after a strong recovery to 6.8% in 2010 led by investment while the contribution from exports and private consumption is likely reduced. On the policy front, after having front-loaded rate hikes in early 2010, Bank Negara Malaysia (BNM) kept the overnight policy rate (OPR) unchanged at 2.75% in H2-2010. With economic activity maintaining steady momentum, commodity prices rising and subsidy reforms gradually being implemented, inflation expectations are likely to rise in 2011. Given its proven independence and proactive approach, we expect BNM to be at the forefront of rate hikes again, raising the policy rate by another 75bps in 2011." (Reuters)
