Would Malaysian exports be affected by US recession?

Malaysia’s export by destination (Jan-Feb 2008 )

Source: Ministry of International Trade and Industry

The chart is taken from Star Newspaper (7 April 2008). According to the writer of this article, a fall in exports to the United States should not result in a drastic drop of exports in Malaysia.

Adding to that, preliminary data released by the Statistics Department last week revealed that Malaysia’s exports have risen 12.3% (to RM100.09 billion) for the first two months of 2008.

Other notable mentions were the increase in exports to Pakistan (growth rate of 71.6%), Australia (33.9%), West Asia (29.1%), India (24.1%), Japan (23.5%) Asean (17.6%), China (15.5%) and the European Union (9.3%).

All the figures look great on paper as export growth are mostly double digits. However, a closer look at the chart gives us another clue as to what is going to happen to our exports. The United States remains to this very day the largest consumer country in the world. An economic slowdown in the United States would mean that US citizens would consume less.

Should this happen, exports to the United States should fall which will in turn hit the economies of countries closely linked to it. Both Japan and China’s economic welfare is highly sensitive to that of the United States. If US demand for Japanese and Chinese exports fall, both countries would also face a slowdown in their economies.

When that happens, both Japanese and Chinese consumers would also stop consuming so much of foreign goods. Since both Japan and China is one of our largest trading partners, a slowdown in the United States would definitely effect us as well. China and India can only help cushion the impact of a global recession and not offset it.

 

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