Global events and their impact on Malaysian trade

Speaking with StarBiz, Malaysia University of Science and Technology economics professor Geoffrey Williams noted that an upside for Malaysian trade was in palm oil. This is because Ukraine is a major exporter of competitive oils.

PETALING JAYA: Despite a relatively low direct exposure to Russia and Ukraine in terms of trade, the conflict between the two countries will have a global impact that will eventually affect Malaysian trade.

Speaking with StarBiz, Malaysia University of Science and Technology economics professor Geoffrey Williams noted that an upside for Malaysian trade was in palm oil. This is because Ukraine is a major exporter of competitive oils.

However, Williams is more concerned about the lockdown and zero-Covid policies in China.

This is because China and Asia, particularly Asean, are major markets for Malaysian exports.

“A contraction in China will affect all regional markets negatively,” Williams said.

Meanwhile, Sunway University professor of economics Yeah Kim Leng believes Malaysia’s primary commodity exports have benefitted from the spike in world fuel and vegetable oil commodity prices.

With Malaysia’s export trade having recorded a new high of RM131.6bil in March 2022, both Williams and Yeah believe that the strong trade performance in March is positive news.

In Williams’ view, this is because it continues a growth trend in export value since the middle of 2020.

“The rate of growth in exports has been falling since November 2021, so this uptick is also good news based on recent trends,” Williams added.

On the other hand, Yeah said it exceeded expectations that export growth will moderate in part due to the high base last year.

“Additionally, accelerating prices have supported the continuing double-digit growth in the total value of exports,” Yeah added.

Yeah said the ongoing war in Ukraine, sanctions on Russia, monetary tightening in the United States to stamp out high inflation and Covid-19 lockdown woes in China will likely temper global demand and moderate Malaysia’s export growth.

However, Williams noted that global demand may ease if there was an anti-inflation response in the US and Europe, which seems likely.

“The International Monetary Fund (IMF) has already cut its global growth forecast to 4.4% from 4.9% due to increasing uncertainty in global demand.

“Global growth was 5.9% in 2021,” Williams added.

Speaking about Bank Negara’s expectation of exports rising by 10.9% this year, Williams said the export performance has been good so far. However, he feels the forecast for exports is uncertain and may impact overall economic growth.

“As governor Tan Sri Nor Shamsiah Mohd Yunus has warned, we have a highly dynamic market hit by factors such as the Ukraine conflict, the China lockdowns and higher oil prices which were not expected at the beginning of the year,” Williams said.

Meanwhile, Yeah thinks Bank Negara’s forecast in gross exports remains achievable despite global demand uncertainties arising from the Ukraine war, global price and inflation shocks, US monetary tightening and China’s zero-Covid policy.

“The country’s transition to the endemic phase has reduced the risk to production and enhanced its role in the global and regional supply chains that are further enhanced by the Regional Comprehensive Economic Partnership agreement that took effect at the beginning of the year,” Yeah added.