Malaysia: Slower trade growth likely in second quarter
PETALING JAYA: Malaysia’s total trade is expected to register slower growth in the second quarter of 2023, as global economic uncertainties continue to persist.
Centre for Market Education chief executive officer Carmelo Ferlito said the country needs to diversify its ability to export both in terms of products and markets.
“If Malaysia’s exports keep shifting from manufactured goods to petroleum products, then we should seriously look into the matter.
“However, a good signal came from the expansion of exports to Singapore and Indonesia, while the relationship with China is shifting towards China being an exporter versus Malaysia,” he told StarBiz.
Malaysia University of Science and Technology economics professor Geoffrey Williams is hopeful that Malaysia’s total trade performance will improve in the second quarter of this year.
“The main positive export growth was in the US market and actually, that has been against quite slow growth overall (in the United States).
“So, for the second quarter, we hope to see some better results.”
However, Williams emphasised that it is the country’s balance of trade and positive surplus that needs to be focused on.
“There is nothing to be done to promote trade in the short term because this is dependent on demand in export markets, which is out of our control.
“The biggest factors remain the opening and recovery of China, the geopolitical uncertainties and whether the tentative growth in major markets push growth in Asean, which will benefit Malaysia.”
Malaysia’s total trade in March declined 1.6% year-on-year (y-o-y) to RM232.72bil amid a contraction in both exports and imports with major trading partners.
Exports for the month amounted to RM129.71bil, down 1.4% from the same month in 2022, while imports declined 1.8% to RM103.01bil.
However, Malaysia’s trade surplus in March widened to RM26.69bil, its highest on record for the month.
Compared to February 2023, trade, exports, imports and trade surplus recorded double-digit growth of 13.5%, 15.5%, 11.1% and 36.4%, respectively.
For the first quarter of 2023, trade grew 3.2% to RM644.87bil as compared with the same quarter in 2022.
Exports over the three-month period grew 2.8% to RM354.63bil while imports expanded 3.7% to RM290.24bil.
Trade surplus edged down by 1% to RM64.39bil. Trade, exports and imports registered the highest value for the period.
Malaysia registered a 3% contraction in trade value with its largest trading partner, China, as exports shrank 6.2% to RM16.68bil as a result of lower exports of electrical and electronics (E&E) products.
However, the United States recorded a 5.2% increase in total trade with Malaysia, underpinned by 7.5% export growth to RM14.59bil on higher shipments of E&E products.
Major Asean markets that received more shipments of Malaysian goods included Singapore, which recorded 3.1% growth to RM20.74bil, and Indonesia, which registered an increase of 17.9% to RM4.88bil.
There was a decline across Malaysia’s exports by sector in March.
Manufactured goods, which made up 84% of the total exports, decreased 0.4% y-o-y to RM108.96bil due to lower exports of E&E products, rubber products and wood products.
The decline was partially offset by higher exports of petroleum products, optical and scientific equipment as well as machinery, equipment and parts.
The export of mining goods and agriculture goods decreased 3.5% and 10.8% on a y-o-y basis to RM10.4bil and RM9.43bil, respectively.
On imports, there was an 8.7% y-o-y decrease in received shipments of intermediate goods, including primary fuel and lubricants, to RM53.81bil.
Additionally, the import of capital goods and consumption goods were up 3.5% and 6.2% y-o-y to RM9.77bil and RM9.26bil respectively.
Commenting on the trade performance, Ferlito pointed out that the “fluctuations” in the figures were normal.
“It is good, however, that import declined more than export, so that Malaysia maintained a trade surplus.
“However, manufactured goods export (in particular E&E) declined, while export was supported by petroleum products. This shift makes trade performances more volatile.”
Williams noted that trade figures tend to be volatile, adding that monthly changes should be viewed on that basis.
“It is the trend that is important. The overall surplus is positive so this is adding to growth.
“But there may be too much optimism about trade recovery in China and Asean, so we need to see how that will develop over time.”
Meanwhile, TA Research in a report said its outlook for total trade remains unchanged, with net exports likely to underperform as import growth continues to outpace exports.
“In the first quarter of 2023, the trade balance reflected a slight reduction in net surplus, with RM64.39bil compared to RM67.96bil in the preceding quarter, representing a y-o-y and quarter-on-quarter decline of 1% and 5.2%, respectively.
“As anticipated, the impact of the base rate has become apparent since March and it is likely that the sluggish growth will persist in the coming months.”
Nevertheless, TA Research believes that the trend in absolute value will continue to sustain for the remainder of the year.
“We caution that trade risks in 2023 are biased towards the downside due to the presence of recessionary risks in developed economies, ongoing inflationary pressures and higher US interest rates.
“These factors could potentially lead to disruptive spill-over effects on the domestic economy. Therefore, we maintain our forecast for export and import growth at 2.5% and 3%, respectively, for 2023.”
Meanwhile, AmBank Group in a report said it expects slower trading activities, going forward, as guided by recent information flow.
“The manufacturing purchasing managers’ index, which has been under the contractionary level since September 2022, remains weak.
“Latest industrial production numbers, especially for the export-oriented segments, have also been trending lower over the same period.”
Additionally, AmBank said the pessimism in the global economy due to the series of interest rate hikes and inflation have proven to be stickier than expected.
“Overall, we expect Malaysia’s economy to grow at 4.5% for 2023, mainly supported by domestic factors including improving labour market, investment realisation and improvement in the construction and the agriculture sectors.”