KUALA LUMPUR (Nov 19): Despite the looming uncertainty in global trade arising from the US trade policy, economists are largely optimistic on Malaysia’s export growth outlook, citing trade diversions and front-loading opportunities, following October's rebound as growth in electronics and palm oil deliveries offset sharp contraction in shipments of petroleum.
Exports in October grew 1.6% to RM128.12 billion from RM126.1 billion in the same month last year, data from the Department of Statistics showed, undershooting Bloomberg’s median consensus estimate of 2.5%.
The team at UOB Global Economics & Market Research kept its forecasts for Malaysia’s export growth at 7.6% for 2024 and 4.5% for 2025 — higher than the government’s forecast of 5.6% for 2024 and 3.9% for 2025 — even as it noted that the trade outlook for the coming year is "subject to downside risks with uncertainty mainly emanating from the incoming Trump administration’s trade and tariff policy”.
“The upside for Malaysia is potential diversion of trade, front-loading of exports ahead of Trump’s proposed tariffs and higher US demand given that the potential tariff changes could still favour a lower tariff from non-China trade partners,” it said.
There are also enhanced buffers from trade diversification and supply chain configurations, while regional investment and construction activity lends another supportive channel, it said.
RHB Bank’s Economic and Market Strategy division, likewise, noted that Malaysia is well-positioned to benefit from a more favourable global economic outlook and strong, export-driven industries. As for US protectionism, it anticipates minimal direct impact from it on Malaysia’s export sector, though it flagged possible significant indirect effects from China that could weigh on the electrical and electronics (E&E) sector.
The bank, which has an above-consensus growth forecast for both the US and China of 2.5% and 5% respectively, thinks that global growth fundamentals will remain resilient and keeps a positive outlook for 2025.
MIDF Research has also maintained its export growth projection of 5.2% for 2024, even as it remained cautious about Malaysia’s external trade, citing the escalation in geopolitical conflicts, weaker final demand from major economies and slowdown in global production and trade activities as reasons.
Still, it thinks the recovery in E&E trade and increased demand for non-E&E commodities will support Malaysia's export growth in the coming months.
Exports of E&E, which accounted for more than 41% of total exports in October, grew 7.6% that month, while palm oil rose 12%. Shipments of petroleum products, however, shrank 31%.
In terms of markets, strong exports to the US (+32.5% y-o-y), EU (+7.7%), Taiwan (+49%), Singapore (+5.6%) and Indonesia (+13.8%) cushioned the contraction in exports to China (-6.5%), Hong Kong (-6.1%), South Korea (-21.5%), UOB said.
MIDF said the drop in outbound shipments to China — Malaysia’s biggest trading partner — was largely due to reduced E&E exports, while the drop in exports to Asean (-3.1% y-o-y) was due to the drop in exports of petroleum products, which more than offset the increased exports of E&E products.
Import growth, meanwhile, continued to lose momentum to an 11-month low of 2.6%, compared to 10.9% a year ago, primarily weighed down by lethargic imports of capital goods and moderate imports of intermediate goods, UOB noted.
MIDF, nevertheless, kept its projection for Malaysia’s import growth at 11.2% for 2024, driven by increased investment activities.
Overall, Malaysia’s trade surplus narrowed to RM12 billion in October as exports slowed at a faster pace than imports.
For the first 10 months of 2024, cumulative trade surplus totalled RM102.8 billion, down 46.3% than the RM191.2 billion recorded in the same period last year.