Exports recovery expected in 2024

Maybank IB Research said the strong trade performance in January 2024 augurs well for the expected rebound in exports.

PETALING JAYA: The better-than-expected rebound in January 2024 export affirms expectations that a recovery in external trade will be seen this year.

Nevertheless, lingering macro headwinds could still pose challenges to a more robust outlook in the coming months, UOB Kay Hian (UOBKH) Research said.

“An escalation and extension of geoplotical tensions in the Middle East and the Red Sea Crisis will further disrupt global supply chain and lift costs; while an ongoing rout in China’s real estate sector and a restrictive global monetary policy stance for a prolonged period will keep external demand subdued and temper an expected upturn in the global tech cycle this year,” the brokerage explained in its report.

Malaysia’s exports saw a robust growth of 8.7% year-on-year (y-o-y) last month, after contracting for 10 straight months. The reading beat Bloomberg consensus estimate of a 3% y-o-y gain.

“The better-than-expected export performance in January 2024 was primarily credited to a stronger turnaround in shipments of manufactured goods and agriculture goods amid year-ago low base effects. This fully offset the weakness in exports of mining goods,” UOBKH Research said.

“January 2024 export outturn reinforces our view of a recovery in external trade this year, but the lingering macro headwinds still pose challenges,” it added.

According to Maybank Investment Bank (IB) Research, the strong trade performance in January 2024 augurs well for the expected rebound in exports which may in turn support the outlook of firmer economic growth this year.

Manufacturing exports gained on higher non-electrical and electronic (E&E) shipments, namely, petroleum products, machinery, equipment and parts, iron and steel products, manufactured metal goods, and optical and scientific equipment.

E&E exports fell further but by a lesser quantum compared to December 2023.

Maybank IB Research noted the Lunar New Year had seen extended shutdowns domestically and regionally in countries including China and Vietnam.

“The calendar effect can be expected to show up in February 2024 numbers, so the key is to see how the two months of 2024 compares with two months of 2023 plus the post-February 2024 monthly trends,” it said.

“For this year, we currently forecast exports and imports to rebound by 4.7% and 5.6%, respectively.

“A major driver for the projected exports rebound this year is the forecast turnaround in the electronics cycle, as the World Semiconductor Trade Statistics expects global semiconductor sales to rebound by 13.1% in 2024,” it added.

Meanwhile CGS-International Research (CGSI) noted that imports had posted a double-digit growth of 18.8% y-o-y last month on capital, consumption and intermediate goods components.

Demand for consumption goods rose 25.4% y-o-y in January 2024, the strongest growth since September 2022 on higher imports of processed food and beverages mainly for household consumption.

However, CGSI said the lower trade surplus of RM10.1bil last month was a poor start to the year.

“This is the lowest trade surplus recorded since May 2020.

“We think that the current account might be supported by a recovery in the services account after foreign visitor arrivals breached the Tourism Ministry target of 19.1 million arrivals in 2023.

“We expect foreign visitor arrivals to continue at this pace in 2024. We maintain our current account forecast at 2.2% of the gross domestic product for 2024,” CGSI said.

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