Malaysia GDP Rebounds in June

Southeast Asian Countries Escape Slump... Vietnam Also to Achieve $10 Billion Trade Surplus This Year

[Asia Economy Hanoi Correspondent Jo Ara, Kuala Lumpur Correspondent Hong Seong-ah] Southeast Asian countries, which faced difficulties in the first half of the year due to the novel coronavirus infection (COVID-19) crisis, are gradually emerging from the downturn according to indicators.

Malaysia, which recorded the worst negative growth in history in the second quarter, succeeded in rebounding in June, and Vietnam's trade surplus exceeded 10 billion dollars through August this year. However, Vietnam is evaluated as having a recession-type surplus due to the significant impact of reduced imports caused by a slowdown in manufacturing production.

According to local media including Free Malaysia Today on the 25th, the Central Bank of Malaysia announced that the gross domestic product (GDP) in June increased by 3.2% compared to the same month last year, escaping negative growth. Malaysia's GDP in the second quarter decreased by 17.1% compared to the same period last year, showing the worst growth rate since the fourth quarter of 1998, but a recovery signal was detected in June, the last month of the second quarter.

The positive growth of GDP in June was due to the partial lifting of lockdown measures. Malaysia had implemented strict lockdown measures from March 18 to prevent the spread of COVID-19 and began gradually easing the lockdown from May, fully lifting movement restrictions on June 10.

Accordingly, the unemployment rate also showed a decreasing trend from 5.3% in May to 4.9% in June. As economic activities restarted, the trade surplus in June also rebounded. The trade surplus in June was 20.9 billion ringgit (approximately 5.9475 trillion won), increasing by 98.7% compared to the previous month, marking the largest increase since October 2019. Exports in June rose by 8.8% from the previous month to 82.9 billion ringgit (approximately 23.5908 trillion won).

In Vietnam, the trade surplus exceeded 10 billion dollars as of the 15th of this year. In particular, a trade surplus of 2.77 billion dollars was recorded in July alone. Specifically, the trade volume in July was 46.96 billion dollars, an 8.5% increase compared to June, with exports increasing by 10.2% to 24.87 billion dollars, marking the second highest figure since August 2019. In the first half of August, mobile phone exports amounted to 2.58 billion dollars, and computers and electronic products exports reached 1.9 billion dollars.

Despite this favorable trend, there are criticisms that the underlying situation differs significantly from initial expectations. In particular, the manufacturing sector's surplus was found to be due to a decrease in raw material imports. Raw material imports account for more than 90% of total imports, making them absolutely critical. Raw material imports decreased by 3% compared to the same period last year through July, with raw material imports for textiles, footwear, and steel dropping by more than 10%. Nguyen Chi Dung, Minister of Planning and Investment, stated, "The trade surplus surged sharply due to reduced raw material imports caused by a decline in domestic production."

Therefore, it is difficult to confirm whether Vietnam's industry will fully revive in the future. The General Statistics Office of Vietnam forecasted that the industrial production index in July increased by only 3.6% compared to the previous month and 1.1% compared to the same period last year, indicating an overall slowdown in domestic industry. Industrial production increased by only 2.6% through July this year, falling far short of last year's 9.4% increase during the same period. In particular, the industrial production index significantly declined in 20 out of 63 provinces and cities nationwide, including Ho Chi Minh City, the economic hub. Imports of consumer goods also decreased by 7.3% last month. Minister Dung stated, "Due to the production decline, most manufacturing companies have carried out workforce reductions and wage cuts."