Current account surplus to stay modest
'The CA surplus fell sharply to RM300mil in 2Q25, or just 0.1% of GDP despite smaller services and primary income deficits,' the research house said in a note to clients yesterday.
It pointed out that the surplus was 'nearly wiped out, as a sharp contraction in the goods surplus and a wider secondary income deficit more than offset a narrower primary income shortfall and a smaller services gap.
'The goods surplus, at RM17bil, was the lowest in 23 years, dragged down by weaker mining-related exports and a jump in capital imports.
'Exports fell 0.6% quarter-on-quarter while imports jumped 8.1%.
'The stronger ringgit likely weighed on export receipts, though electrical and electronics products demand remained firm,' the research house said.
The secondary income deficit also widened significantly, almost quadrupling to RM4.6bil, as outward remittances climbed and inward remittances fell.
On the other hand, the primary income deficit narrowed to its smallest in eight quarters at RM8.9bil, supported by higher earnings from Malaysian investments abroad and lower profit repatriation by foreign firms.
On the services front, the deficit narrowed slightly to RM3.3bil, helped by higher travel receipts and manufacturing services surpluses.
Meanwhile, the financial account deficit shrank markedly to RM2.2bil, the smallest in a year, compared to RM20.3bil in 1Q25.
This improvement was underpinned by the largest portfolio investment surplus since 2Q21, as foreign demand for domestic bonds surged.
Direct investment inflows, however, slowed sharply to RM2.2bil amid weaker foreign direct investment.
Looking ahead, Kenanga Research warned that 'tariff risks remain elevated in the second half of the year, which may slow export growth and narrow the goods surplus'.
On the other hand, it noted that stronger tourism receipts ahead of Visit Malaysia 2026 are expected to cushion the weakness.
The research house added that US President Donald Trump's tariffs and a stronger ringgit could increase the risk of a CA deficit but is nonetheless expecting exports to hold up, supported by the government's focus on higher-value-added products.
'The global technology upcycle and strong artificial intelligence-related demand should also boost Malaysia's export-orientated sectors,' it said.
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