KUALA LUMPUR (Dec 18): Economists remain cautiously optimistic on Malaysia’s external trade outlook for 2025, following better-than-expected November data which saw the country’s trade surplus rise to a 14-month high.

However, protectionist policies expected from the US could constrain global trade next year, as economists also highlighted potential knock-on effects from that to Malaysia due to its position in China-centric supply chains.

Malaysia’s trade surplus expanded 26.3% year-on-year (y-o-y) to RM15.3 billion in November 2024, marking the 55th consecutive month of surplus since May 2020.

Exports rose 4.1% y-o-y to RM126.57 billion, while imports increased 1.6% to RM111.28 billion, bringing total trade to RM237.85 billion, up 2.9% from a year ago.

For the first 11 months of 2024, Malaysia's total trade expanded by 8.7% to RM2.6 trillion, thanks to a 4.7% growth in exports and a 13.3% rise in imports. However, trade surplus for the same period shrank by 42% year-on-year to RM117.9 billion.

UOB, in a note, said the exports growth of 4.1% was above its estimate of 3% and consensus’ estimate of 1.9%.

However, on a month-on-month (m-o-m) basis, exports "reversed course" and contracted by 1.2%, as opposed to a 3.7% m-o-m gain in October.

The research house said it remains “cautiously optimistic about Malaysia’s external trade outlook with an export growth forecast of 4.5% (Ministry of Finance estimate: 3.9%), slowing down from a revised estimate of 5.1% for 2024 (MOF estimate: 5.6%)”.

“This is largely due to the potential impact of tariffs under [US President-elect Donald] Trump’s second presidency, particularly if blanket tariffs are implemented on all imports into the US; a challenging growth prospect for China; and lingering geopolitical tensions,” it said.

Similarly, RHB said it remains cautious on the impact of potential protectionist policies under the new US administration.

“We anticipate minimal direct effect on Malaysia's export-oriented sectors from US protectionism, as the US trade deficit with Malaysia is relatively small.

“However, the ripple effects through China could be substantial,” it said. “A return to protectionist policies could exacerbate US-China tensions, with new tariffs and import restrictions potentially affecting Malaysia's position as a key supplier in China-centric supply chains, particularly in the electrical and electronics sector,” it added.

Malaysia’s export performance in November 2024 was supported by higher shipments of electrical and electronic (E&E) products, which rose 12.2% y-o-y to RM51.03 billion, accounting for 40.3% of total exports.

MIDF Research, in a note, said it “still expects the recovery in the E&E trade and increased demand for non-E&E commodities to support export growth in the coming months.

“However, we remain cautious that Malaysia’s external trade outlook may be adversely impacted by the escalation in geopolitical conflicts, weaker final demand from major markets and slowdown in global production and trade activities,” it said.

Back to Malaysia’s November exports data, palm oil and palm-based agriculture products recorded a 19.9% increase to RM7.4 billion, while machinery, equipment and parts grew 23.5% to RM6.3 billion.

Other sectors include rubber products, which rose 21.3% to RM2.3 billion, and chemical and chemical products, which increased 6.1% to RM6.4 billion.

Exports of jewellery also saw gains, amounting to RM270.2 million. Domestic exports, which make up 83.3% of total exports, rose 10.3% y-o-y to RM105.4 billion.

In the month, exports to the US surged by RM7.4 billion, followed by Taiwan at RM2.5 billion and India at RM497.9 million.

Imports, on the other hand, saw notable increases from China, up by RM2.3 billion, Taiwan by RM2.1 billion, and Mexico by RM784.5 million.