KUALA LUMPUR (March 20): Malaysia’s current-account surplus in the balance of payment is expected to improve this year following a sharp decline to a 26-year low in 2023, Bank Negara Malaysia (BNM) said.

Current account surplus, as a proportion of economic output, may rise to 1.8%-2.8% this year from 1.2% in 2023, thanks to higher goods surplus amid lower deficit in services account, BNM said in its Economic and Monetary Review 2023 report released on Wednesday.

The goods account is projected to record a “higher surplus, as exports growth recovery more than offsets the rebound in imports growth”, BNM said. The services account will see “a smaller deficit” mainly due to a higher travel account surplus on recovery in tourist arrivals, it noted.

For more than two decades, Malaysia has run a current-account surplus, which means that the country is earning more foreign exchange from goods and services exported than it is spending on imports, thanks to strong shipments of electrical and electronic products.

The current-account surplus, however, more than halved to RM22.8 billion or 1.2% of gross domestic product, its lowest since 1997, as both exports and export earnings fell amid sluggish external trade, global technology downcycle and lower commodity prices.

Further, Malaysia’s financial account turned negative amid massive portfolio outflows, which more than offset the inflows from other investment and direct investment accounts, as investors and traders scrambled out when the ringgit’s interest rates fell lower than that of the greenback.

The ringgit has fallen to its fresh 26-year low against the US dollar in February before rebounding. The ringgit is still down 1.9% year-to-date, adding to 2023’s 4.3% decline.

Still, the goods and services accounts could improve this year and outweigh the continued deficit in the primary income, which is driven by the continued income payment accrued to foreign investors in Malaysia amid improving exports earnings, BNM said.

“Similarly, the secondary income account is expected to remain in deficit, due mainly to sustained outward remittances by foreign workers,” the central bank added.

Read also:
Malaysia will avoid balance of payment crisis as current-account surplus widens, BNM says

Don't miss the other highlights of the BNM Annual Report 2023. Read the articles here.