Malaysian imports declined for a second consecutive month, indicating the country's new value-added tax is weighing on consumption. Exports slumped.
Imports fell 7.2 per cent from a year ago, versus a (revised) 7.0 per cent decline in April, when the six per cent GST took effect. The last time imports fell more than 7 per cent was in 2009.
The GST is one factor. Another is falling oil prices. Only the former is concerning.
Analysts at Moody's Analytics said imports were likely to pick up later this year as the impact of the new tax wanes.
Exports also fell for a second month, declining 6.7 per cent after an 8.8 per cent fall in April.
"Petroleum and liquefied natural gas shipments make up around 13% of Malaysia's total exports, and they are slumping as prices fall," said Moody's Analytics before the release.
Malaysia's top exports are electronic products, petroleum and liquefied natural gas.
By region, exports fell 4.8 per cent year-on-year to the US, stumbled 30.4 per cent to Japan, and slipped 34.6 per cent to Australia. But exports to China jumped 5.7 per cent; shipments to Thailand rose 17.3 per cent.
Exports too are likely to pick up this year as demand from the US picks up in the tech space. A 10-year low for the Malaysian currency, struck earlier this week, should also help.
Overall the trade surplus for the month was 5.5bn ringgit, in line with forecasts but lower than a 6.87bn ringgit surplus a month before.
"With the Malaysian economy struggling to cope with lower oil prices, we forecast a narrowing of the current account surplus to 2.4% of GDP in 2015, versus an estimated 4.6% in 2014," said BMI Research.
Chart below from Barclays
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