PETALING JAYA: Despite Malaysia’s strong external trade performance in recent months, the second half of 2026 (2H26) may experience moderation in export growth as frontloaded demand gradually fades, economists say.
Malaysia’s exports surged by 45.3% year-on-year (y-o-y) to RM184bil in May 2026, marking the highest monthly record to date, according to the Statistics Department.
This represents a rise from the 37.3% y-o-y recorded in April, and exceeds y-o-y consensus expectations of 29.7%.
May 2026 also saw Malaysia’s trade surplus widening to RM40.4bil, compared to RM0.8bil from a year earlier.
“On a month-on-month (m-o-m) basis, the surplus increased by 38.2%, underscoring the continued strength of Malaysia’s export sector despite an uncertain global environment,” TA Research said.
However, total trade moderated by 2.9% m-o-m, ending two months of expansion, which implies a mild normalisation following a strong showing in April.
Economists noted that the export outperformance in April and May may partly reflect earlier stockpiling amid global supply concerns.
Kenanga Research said that the recent strength, which was partially due to a low base and frontloading, may not hold through the year.
While it predicted near-term strength to persist on the back of continued stockpiling activities and resilient electrical and electronics (E&E) demand, it said growth in 2H26 will likely be more tempered as base effects fade and trade flows normalise.
“Risks remain tilted to the downside, including lingering supply disruptions, US policy uncertainty, and softer global tech demand,” it said.
The research house said export strength in May would support a second quarter of 2026 (2Q26) gross domestic product growth of above 5%, though sustainability into 2H26 continues to be a concern.
Nevertheless, IPP Global Wealth director of investment strategy and country economist Mohd Sedek Jantan pointed out that it would be “overly simplistic” to tie the entire export growth surge to frontloading.
“The more important story is that underlying demand remains robust,” he told StarBiz.
“The global artificial intelligence (AI) infrastructure buildout is still in its early innings, with continued investment across advanced chips, servers, networking equipment and data centres (DCs) creating a supportive backdrop for E&E exports.”
Export momentum, he said, is not expected to see a sharp deceleration, but will remain firm through 3Q26, before moderating more visibly towards year-end as frontloading effects fade and base effects become less favourable.
“As long as the AI capital expenditure cycle continues and global technology spending remains healthy, Malaysia’s export sector should continue to provide a meaningful contribution to economic growth through the remainder of 2026.”
According to TA Research, exports of manufactured goods, which comprise 90.7% of total exports, rose by 51.7% y-o-y in May, largely driven by higher exports of E&E products.
Meanwhile, exports of mining products (4.4% of total exports) increased by 36.5% y-o-y, underpinned by stronger liquefied natural gas exports. Agricultural exports (4.1% of total exports) fell by 22.9% y-o-y, due to weaker shipments of palm oil and palm-based products.
Looking ahead, Mohd Sedek said the E&E sector is expected to stay the primary driver of export growth, particularly semiconductors, advanced packaging, DC-related components, and industrial electronics.
Resource-based exports such as palm oil, as well as exports related to DC development, power infrastructure, and industrial automation should also see healthy growth.
On the other hand, sectors exposed to discretionary consumer spending such as consumer electronics and furniture may face softer demand as higher interest rates and elevated living costs weigh on consumption in major developed markets.
“We also expect trade-sensitive sectors that benefitted disproportionately from frontloading activity earlier in the year to experience a more noticeable slowdown as order patterns normalise,” he said.
Apex Research similarly said it foresees the E&E sector’s strong momentum extending, supported by growing semiconductor applications across segments.
As a result, the research house raised its export growth projections to 16.3% y-o-y from 8.1% previously, reflecting robust year-to-date export growth of 24.3% and a stronger-than-expected E&E outlook.
CGS International Research also lifted its 2026 export growth estimates to 18.1% y-o-y from 7.9%, while remaining cautious on potential moderation in 2H26.
It anticipates the growth of global semiconductor sales and AI infrastructure demand to continue supporting Malaysia’s E&E sector for the rest of 2026.
Moreover, strength in petroleum-related product exports, driven by higher export prices and stronger external demand, has provided additional support to overall export performance, the research house added.
“On balance, while current strength partly reflects temporary factors, the stronger external backdrop supports a higher export outlook,” it said.
