PETALING JAYA: The contraction in Malaysia’s exports last month is not expected to affect the recovery of external demand for the country’s goods through 2024.
Economists in general remain optimistic that Malaysia will register modest growth in exports this year, supported by growing demand from international markets, the anticipated recovery of China’s economy, and a promising outlook for the global semiconductor market.
Kenanga Research, for one, said it continued to expect export growth to gradually improve in the coming months, registering double-digit expansion by year-end.
“This is largely attributable to the potential swing in the technology upcycle in the second half of 2024 and China’s steady economic rebound supported by ongoing government stimulus.
“Besides, growth is likely to be supported by demand from regional economies and better-than-expected performance from advanced economies,” the research house said.
Overall, Kenanga Research projected growth of 9.4% for exports in 2024, a reverse from contraction of 8% last year.
The Statistics Department revealed last Friday that Malaysia’s exports in March declined 0.8% year-on-year (y-o-y), the same pace as recorded in February, but better than consensus estimates for a 1.1% y-o-y decline for the month in review.
The contraction last month was due mainly to persistent weakness in shipments of electrical and electronic goods, crude oil and palm oil products.
The country’s imports, on the other hand, grew 12.5% y-o-y last month, faster than 8% y-o-y in the preceding month. The trade surplus widened to RM12.81bil in March 2024 from RM11.24bil in February 2024.
Kenanga Research said despite the optimistic outlook for this year, Malaysia’s export performance remained susceptible to external factors, especially potential disruptions from rising geopolitical tensions in the Middle East including a possible prolonged war and sanctions that could disrupt the global supply chains and trade.
Hong Leong Investment Bank (HLIB) Research concurred, noting that an escalation of geopolitical tensions would continue to pose downside risks, as supply chain disruptions and renewed price pressures could weigh on demand and trade flows.
Neverthless, it remained optimistic that global trade activity would recover in 2024, aided by a low-base effect, recovery in the global technology sector as well as increasing commodity prices.
“This is expected to benefit Malaysia as the country is an exporter of commodities and electrical and electronics goods,” HLIB Research said.
TA Research maintained its growth projection of 4.8% for exports and 4.7% for imports in 2024.
“For this year, we anticipate improvement in trade performance, buoyed by growing demand from international markets, the anticipated recovery of China’s economy, and a promising outlook for the global semiconductor market,” the brokerage wrote in a report yesterday.
“At the same time, we recognise the potential risks that could affect the trade outlook for this year. Recent events, such as the Iran-Israel crisis, underscore how geopolitical tensions can cause trade disruptions.
“These disruptions may manifest in the form of tariffs, sanctions, and trade embargoes, impeding the smooth flow of goods and services,” it said.
Meanwhile, UOB Kay Hian Research maintained a cautiously optimistic outlook for Malaysia’s trade performance, with a moderate export growth forecast of 3.5% in 2024.
“This is mainly premised on the downside risks from escalating geopolitical tentions in the Middle East and higher possibility of tighter monetary conditions among developed economies for a prolonged period amid a challenging economic outlook in China,” the brokerage said.
“Although the primary impact from a potential widespread war in the Middle East on Malaysia’s economy is expected to be neglible, the secondary effects, especially the threats of closure of the Strait of Hormuz and oil shortages are of greater concern,” it added.
