KUALA LUMPUR (Feb 20): Malaysia’s exports grew 8.7% to RM122.43 billion in January — the first year-on-year growth after contracting for 10 straight months.
The growth pace exceeded Bloomberg’s consensus estimate of 3%. This helps reinforce the positive export outlook held by some economists who expect that improved regional economic growth, particularly in China, will drive Malaysia’s exports.
However, one swallow does not make a summer, and other economists are concerned about uncertainties due to geopolitical tensions.
It is worth noting that exports for electrical and electronics (E&E) products contracted 6.5% year-on-year in January. Still, some economists remain optimistic that the sector is due for recovery because of the expected turnaround of the global technology downcycle, which in turn will fuel export growth.
In a research note on Tuesday, RHB Investment Bank said it maintains its sanguine view of the trade outlook for Malaysia on the back of a rosier global and regional economic outlook.
“Higher import demand from China is anticipated as the economic momentum in China has begun to gather steam. Malaysia would be at the forefront to benefit from the recovery in China's economy as key export products, such as E&E, machinery and transport equipment, and other manufactured goods, command the lion's share of trade in China's import demand,” it said.
As such, it expects the E&E exports to grow further, particularly due to a positive spillover effect from China's improved trade performance and manufacturing activities.
Meanwhile, MIDF Research echoed the positive outlook and projected that Malaysia’s exports would rebound by 5.2% in 2024, driven by increased demand for petroleum products and palm oil, alongside the anticipated turnaround in the E&E trade.
The research house commented that the 7.4% contraction in exports to China and 7.9% to Hong Kong could be caused by slower business activities ahead of the Lunar New Year holiday.
Nevertheless, MIDF anticipates that shipments to major markets such as China, the US and regional countries will improve, thereby supporting trade recovery this year.
However, it also cautioned against several downside risks such as the worsening of geopolitical and trade tensions, lower demand from major trading partners and prolonged weakness in global production activities.
On the other hand, UOB Global Economics and Markets Research holds a more prudent outlook for Malaysia's exports with an estimated growth of just 3.5% in 2024 due to the lingering macro headwinds.
"An escalation and extension of geopolitical tensions in the Middle East and the Red Sea Crisis will further disrupt the global supply chain and lift costs, while an ongoing rout in China's real estate sector and a restrictive global monetary policy stance for a prolonged period will likely keep external demand subdued and temper an expected upturn in the global tech cycle this year," it said in a note on Tuesday.