Exports to recover by early 2024

PETALING JAYA: Malaysia’s export performance is expected to continue improving in the coming months, following a slower contraction registered in October, in tandem with the bottoming out of semiconductor shipments.

According to AmBank Research senior economist Azri Azhar, with the anticipated improvement, exports would likely return to the positive territory by early next year.

“Exports are expected to recover by early 2024 on the assumption that the global technology cycle has bottomed while tapering inflationary pressures among major economies implies that monetary policy tightening by major central banks is at the tail-end,” he said.

“The Nasdaq PHLX Semiconductor index, which correlates with exports growth, suggests that the semiconductor industry hit its low point at the end of the first half of 2023 and has since embarked on a recovery path, offering positive signs for 2024.

“A similar trend is seen in the World Semiconductor Trade Statistics (WSTS), where semiconductor net billings have posted positive growth in September 2023, after declining since mid-2022,” Azri added.

According to the Statistics Department, the country’s exports in October fell 4.4% year-on-year (y-o-y) to RM126.2bil, compared with a contraction of 13.7% y-o-y in September.

The latest reading was also better than market expectations for a 5.1% y-o-y decline, based on the projections of seven economists surveyed by Reuters.

Imports, on the other hand, fell 0.2% y-o-y to RM113.3bil in October. This compared with a 9.7% y-o-y decline expected in the Reuters poll.

Overall, total trade fell 2.4% y-o-y to RM239.5bil last month, and trade surplus shrank 30.3% y-o-y to RM12.9bil. This was the 42nd consecutive month of trade surplus for Malaysia since May 2020.

The Investment, Trade and Industry Ministry (Miti) said in a statement that the decline in total trade was a reflection of the ongoing challenges faced by Malaysia’s external sector as a result of global economic factors.

For the 10 months to October 2023, trade surpassed the RM2 trillion mark, reaching RM2.18 trillion. Exports totalled RM1.186 trillion, while imports were valued at RM995.55bil.

Miti noted that trade, exports and imports each posted an 8% decrease compared to the corresponding period last year, while trade surplus was lower by 7.9%, amounting to RM190.04bil.

AmBank Research said that overall, it expected Malaysia’s economy to grow by 4% in 2023, and 4.5% in 2024, following exports contraction envisaged for the full year which was also partly explainable by the high-base effect.

Meanwhile, RHB Research in a report said Malaysia was expected to see a gradual recovery in exports, supported by a rise in the global technology cycle and tourism activity.

“Policymakers recognise several signs indicating a recovery in electrical and electronics (E&E), including improved E&E export trends in Malaysia and Asean, expectations for growth in the WSTS global semiconductor sales, as well as the inventories and replacement cycle which points to the strength in demand.

“The WSTS is projecting a rebound in semiconductor sales at an annual growth of 11.8% in 2024 versus a decline of 10.3% for 2023, which would help to lift Malaysia’s E&E exports,” it said.

MIDF Research pointed out that expectations for turnaround in E&E trade had resulted in projections for slower export decline in the coming months.

It added that the continued recovery in China would be a key factor that would support regional trade outlook.

“We expect the recovery momentum will continue and support for both exports and imports to pick up going into next year,” it said.

According to CGS-CIMB Research, Malaysia’s exports might have bottomed since August on high base and China stabilising.

As such, the brokerage said the country’s export contraction should continue to narrow in the fourth quarter of 2023 before turning mildly positive in the first quarter of next year.

“This will be partly helped by the dissipating base effect as well as stabilising demand from China as we enter 2024,” it said.

In a statement yesterday, chief statistician Datuk Seri Dr Mohd Uzir Mahidin said Malaysia’s export performance in October was in line with the decline by both re-exports and domestic exports.

“Re-exports amounted to RM29.8bil, shrank by 2.2% as compared to October 2022. Domestic exports worth RM96.4bil, contributing 76.4% to total exports, dropped by 5% y-o-y.

“As compared to September 2023, the performance of exports, imports and total trade recorded an increase of 1.5%, 13.4% and 6.8%, respectively. Meanwhile, trade balance recorded a decrease of 47.2% as compared to September 2023,” he said.

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