Malaysia exports to stay in soft patch in 1H23


MALAYSIA’S exports, which expanded by 9.8% to RM112.28 billion last month, is expected to grow at a softer pace in the first half of this year (1H23) on slower outbound shipments of manufactured and commodity-based products, said RHB Investment Bank Bhd (RHB Research).

The research house’s cautious view on trade outlook stems from slower growth in advanced economies, impact of tightening financial conditions, projected ease in global commodity prices, as well as uncertainties in development of geopolitical tensions.

It noted that the S&P Global Malaysia Manufacturing Purchasing Managers’ Index (PMI) remained in contractionary territory at 48.4 points in February 2023 versus 46.5 points in January 2023 amid softness in new export orders.

RHB Research said the export momentum in both nominal and real terms stayed soft for the month of February 2023.

It noted that both exports and imports declined by 0.3% month-on-month (MoM) and 1.9% MoM respectively in February.

“We continued to see signs of weakness in shipments of electrical and electronic (E&E) products,” said RHB Research.

However, it noted that slight improvements were observed in commodity-based products with higher shipments of petroleum products.

In terms of destination, it said slower outbound shipments were observed to major economies, namely China and the European Union.

Likewise, it noted that the import momentum slowed amid lower imports of consumption goods.

However, RHB Research expects the trade performance to show some signs of improvement by 2H23, lifted by higher global demand for goods and services amid recovery in global economic growth.

Meanwhile, MIDF Amanah Investment Bank Bhd (MIDF Research) is maintaining its projection that exports and imports will expand slower by 9.2% and 9.5% on a yearly basis this year.

In a separate research note, expanding external demand for E&E and commodities, particularly petroleum and palm oil, will continue to drive export growth this year.

However, it noted that the performance of commodity trade will be subject to the price effect, as current prices are relatively lower than last year.

“Meanwhile, we expect the pick-up in exports to China will support trade in coming months, as Malaysia stands to benefit from the reopening of China’s economy,” it said.

In addition, it said trade with free trade agreement (FTA) countries will also grow, boosted by the ratification of trade agreements namely the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

“Nevertheless, we opine several downside risks to trade outlook could come from weaker global demand, elevated inflation, excessive policy tightening, and possible re-escalation in geo-political and trade tensions,” it said.

Malaysia’s February trade data remained on an upward trajectory, with a double-digit growth of 11% to RM204.99 billion from a year ago, while exports expanded 9.8% to RM112.28 billion. Imports for the month increased 12.4% to RM92.71 billion.

A trade surplus was recorded for 34 consecutive months since May 2020, valued at RM19.56 billion.