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Malaysia: Exports face weaker growth, say analysts
PETALING JAYA: Uncertainties in the global landscape might curb the upward momentum of Malaysia’s recent external trade performance, according to AmBank Research.
External trade continued to show robust growth in August, as overall trade surged by 56.7%, thus bringing total trade to RM265.7bil.
The strong trade data was supported by robust exports, which grew by a whopping 48.2%, bringing total exports to RM141.3bil, noted the research unit.
However, AmBank Research pointed out that slower global growth could hurt Malaysia’s trade outlook.
The research unit said risks could come from weaker global demand amid rising global inflation, a possible sharp slowdown in the United States due to aggressive monetary tightening, a shortage of raw materials or supply chain disruption, and a weak recovery in China following the Covid-19 lockdowns there earlier this year.
AmBank Research noted that early signs of a potential slowdown are seen in the manufacturing sector, where new orders for exports are softening.
It was also noted that commodity prices are easing.
Malaysia’s exports are expected to hit growth of 24% to 25% this year, with slower export growth expected sometime later in the second half, affected by a bleaker global economic outlook.
“With the average January to August growth at 30.2%, to achieve our 2022 projection, the balance of four months’ average exports would be 11% to 13%. This seems within striking distance,” said AmBank Research, which also maintained its imports (growth) forecast at 26% to 27% this year.
AmBank Research said the country’s strong external trade performance is reflected by the higher export shipments of electrical and electronic (E&E) products, petroleum products, palm oil and palm oil-based agriculture products, liquefied natural gas (LNG), as well as optical and scientific equipment.
The August data showed that Malaysia’s exports of petroleum products, LNG, and optical and scientific equipment reported the highest monthly value.
“We expect growing external demand to drive overall export growth this year, and the firm import growth will continue on the back of continued improvement in domestic economic activity,” said AmBank Research.
Meanwhile, CGS-CIMB Research also pointed out that Malaysia’s average July to August trade surplus is still lower than that of the second quarter, pointing towards the possibility of a weaker goods surplus in the third quarter.
“On the other hand, incoming foreign tourists will likely support a recovery in the export of services. We still maintain our current account surplus forecast for 2022 at 1.7% of gross domestic product or GDP (2023 forecast: 2.1%),” said CGS-CIMB Research.
The research unit said while oil and gas (O&G) exports could provide support ahead amid strong demand, shipments of palm oil and E&E products could be pointing downwards.
CGS-CIMB Research said going forward, higher shipment volumes of O&G products could partly offset the downtrend in Brent oil prices, lending support to mining exports.
As for palm oil exports, Malaysia recorded a second month of contraction in August amid greater competition from Indonesia, which recently cut its export levy for crude palm oil (effective from June to October 2022) to lower its oversupplied domestic market.
“This poses a damper to Malaysian palm oil shipments in the next few months,” said the research unit.
For E&E, CGS-CIMB Research noted that strong August exports seemed to buck global trends, although this was partly attributed to the low base as well as some impact from the weaker ringgit.
“Over the longer term, we think E&E shipments will start to come down amid normalised demand for E&E products,” said CGS-CIMB Research.
Source: https://www.thestar.com.my/business/business-news/2022/09/22/exports-face-weaker-growth-say-analysts