Malaysia: Narrower trade surplus likely this year

PETALING JAYA: Malaysia is expected to register narrower trade surplus this year amid the anticipated slowdown in export and import growth in the months ahead.

That is the view shared by most economists who cited the downward risks posed by the US and European economies. They believed the banking crisis in these developed economies could outweigh the positive impact of China’s reopening of its economy.

Maybank Investment Bank Research, for instance, projected a trade surplus of RM240bil for 2023, a decline from the RM255.5bil registered in 2022.

“We have maintained our conservative global real gross domestic product (GDP) growth forecast for 2023, as upside from China’s reopening is now tempered by the banking turmoil in the US and Europe, hence our outlook of slower 2023 exports and imports growth,” the research house said.

It expected global GDP growth to slow to 1.9% in 2023 from the estimated 3% in 2022, while 2023 export and import growth could slow to 4% and 6%, respectively, from 25% and 31% in 2022.

CGS-CIMB Research said its overall outlook for Malaysia’s 2023 trade balance remained positive.

It noted that Malaysia’s February trade surplus widened to RM19.6bil from RM18.1bil in January, following a decline in import value.

“On a cumulative basis, the trade surplus remained sizeable at RM37.7bil in the first two months of this year, compared to RM38.4bil in the corresponding period in 2022,” the brokerage said.

“We believe this will be a positive support for Malaysia’s current account to achieve our forecast 2.1% of GDP for 2023 (2022: 2.6%),” it added.

The Statistics Department on Monday revealed that Malaysia’s export growth accelerated to 9.8% year-on-year (y-o-y) in February from 1.4% y-o-y in January, driven by the electrical and electronics sector as well as commodity-related segments.

Import growth also accelerated to 12.4% y-o-y in February from 2.2% y-o-y in the preceding month.

Despite an acceleration in export and import growth last month, economists said overall trade was still expected to moderate in the months ahead due to slower global GDP.

AmBank Research noted that the recent banking crisis in the United States and Europe had added more to downside risk to the overall global growth outlook.

“We continue to hold on to a view of moderate export growth for the year as the global economy continues to deal with cumulative effect of higher interest rates,” AmBank Research said.

“Malaysia’s manufacturing Purchasing Managers’ Index (PMI) rebounded in February 2023, but still remain in the contractionary territory. The survey also cited that new export orders continued to slow due to fragile external demand,” it added.

Kenanga Research maintained its 2023 export growth forecast at 5.8% amid heightened external risks.

“We expect export growth to remain moderate going forward, with a possibility of growth contraction given the normalisation of economic activities, relatively lower commodity prices and the diminishing effect of a lower base,” the research firm explained.

“We maintained our 2023 GDP forecast at 4.7% (2022: 8.7%), anticipating that economic growth will be supported by resilient domestic demand attributable to a lower unemployment rate, increased tourist arrival and the gradual effect of China’s economic reopening.

“Nonetheless, we are still pencilling a cautious outlook, given the heightened external uncertainties amid rising geopolitical tensions and recent global banking fears,” it added.

Meanwhile, Hong Leong Investment Bank Research said indices for container shipping, air freight, electronic components and raw materials are all below trend and falling, suggesting broad-based weakness.

“On the global front, trade growth appears to have slowed and is likely to remain weak in the near term following a further decline in the March release of the World Trade Organisation Goods Trade Barometer index of 92.2 versus the previous 96.2.

“Malaysia’s trade performance is also expected to moderate in the coming months, though still poised to benefit from the ongoing reopening in China,” it added.