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Wednesday August 1, 2:17 PM

Malaysia June trade surplus drops, worse to come

KUALA LUMPUR, August 1 (Reuters) - Malaysia's trade surplus shrank to a five-month low in June and narrowed 10 percent year-on-year in the first half of 2001, hit by a prolonged slump in electronics exports and economists warned of worse to come.

Department of Statistics data released on Wednesday showed a trade surplus of 3.3 billion ringgit ($868 million) in June, down from 4.7 billion ringgit in the same month last year.

For the first half, Malaysia's trade surplus touched 25.8 billion ringgit versus 28.8 billion ringgit during the same period last year.

Economists said demand for Malaysian electronics -- the country's largest export revenue earner -- was likely to worsen in coming months.

"The numbers were within expectations, so there's nothing to be alarmed about," said Lee Heng Guie, an economist at HLG Research.

"Going forward, it will probably be worse in the third quarter. We have not seen any signs of visibility in the electronics cycle," he told Reuters.

Last year's second-half surge in the trade surplus means the year-on-year drop in the trade balance for the next six months is likely to be steeper due to a base effect.

Malaysia recorded a trade surplus of 14.8 billion ringgit in the third quarter of 2000 and 17.1 billion ringgit in the final three months, and since then a slowdown in exports to the United States and Japan has hurt the national economy.

The United States and Japan together take up about a third of Malaysia's exports while Singapore, which recently fell into a technical recession, accounts for another 18 percent.

Last month, the independent think-tank Malaysian Institute of Economic Research cut its full-year gross domestic product growth forecast to 2.2 percent, well below the 8.5 percent expansion recorded in 2000.

Wednesday's data showed total exports down 13.5 percent year-on-year in June to 27.5 billion ringgit.

Electrical and electronic products, which account for 56 percent of Malaysia's total exports, fell 6.4 percent year-on-year in the January to June period.

Electronic makers are already showing the effects.

Unisem Bhd , one of the country's largest chipmakers, slumped to a loss of 7.4 million ringgit in the second quarter from a profit of over 37 million ringgit the same time a year earlier.

Total imports of intermediate and capital goods dipped 10.2 percent in June, supporting expectations of further weakness in manufacturing activity in the coming months.