KUALA LUMPUR (Feb 20): Malaysia’s exports fell far short of expectations in January 2025, raising concerns among economists over the country’s trade outlook amid external headwinds.

Exports grew a marginal 0.3% year-on-year (y-o-y), significantly below Bloomberg’s consensus forecast of 5%, marking a sharp slowdown from December’s 16.9% growth. The export growth of 0.3% in January 2025 marked the slowest pace since September 2024, when exports contracted marginally by 0.3%.  

The weaker-than-expected performance was largely attributed to a high base effect from the previous year and a shorter working month due to the Lunar New Year holidays, according to economists.

Economists cautioned that while the sluggish start to the year is partly seasonal, it highlights broader risks to Malaysia’s external trade.

Key concerns include the potential impact of US tariffs on semiconductors and other high-tech products, early signs of a semiconductor downcycle, and softer demand from major markets like China.

MIDF Research warned that uncertainties surrounding US trade policies and weaker demand from key trading partners could weigh on trade performance.

“Escalating trade tension with unfavourable tariffs and quotas, particularly the planned tariffs on semiconductors could weigh on Malaysia’s exports and cloud trade outlook,” said MIDF Research in a note on Thursday.

US President Donald Trump’s administration had recently imposed a 25% tariff across the board for steel products imported into the country, as well as threatening to impose a 25% tariff on automobiles, pharmaceuticals and semiconductors.

Electrical and electronic (E&E) products are Malaysia’s largest export products, making up 39.9% of the country’s export values in 2024, or around RM601.18 billion.

According to the Office of the United States’ Representative, the US imported US$52.5 billion (RM232.55 billion) worth of goods from Malaysia in 2024, up 13.7% or US$6.3 billion from 2023. The US has a trade deficit of US$24.8 billion with Malaysia in 2024.

“Despite the effect of the Lunar New Year holiday, we keep a cautious view on demand from China given the intensified trade tensions and ongoing challenges in the property market,” it added.

Looking ahead, MIDF Research expects external trade to continue growing this year. It has projected exports to grow at 4.9% this year, supported by steady demand for E&E products and commodities.

“We believe that Malaysia is well-positioned to navigate the challenging trade landscape due to solid economic fundamentals, with continued support from growing domestic demand, resilient household spending, and increased investments,” it added.

The research firm has forecasted for Malaysia’s imports to grow at 4.5% in 2025. Gross imports expanded to RM119.16 billion in January 2025, a 6.2% increase compared to January 2024.

The team at UOB Global Economics & Market Research kept its forecasts for Malaysia’s export growth at 4.5% for 2025 — higher than the government’s forecast of 3.9% for 2025 — even though it noted they were cautious on Malaysia’s trade outlook on several reasons including US tariff uncertainties, signs of a semiconductor downcycle, and the continued decline in mining exports.

“Trade policies and tariff uncertainties as Donald Trump’s latest tariff threat on imported semiconductors would have a material impact on Malaysia (whereby E&E accounts for 41.1% share of total exports),” it noted.

“The semiconductor cycle has peaked since 3Q2024 (third quarter of 2024) with signs of an early year-on-year downcycle that would weigh on Malaysia’s shipments going forward,” it added.

The research firm also flagged concerns over Malaysia’s current account balance, noting that the smaller trade surplus in January suggests a narrower current account surplus in the first quarter of 2025.

Malaysia’s trade surplus sharply declined to RM3.6 billion in January this year, narrowing 81% from RM19.1 billion in December 2024. On a year-on-year basis, the trade surplus also narrowed 64% from RM10.2 billion in January 2024.

This marked the smallest monthly trade surplus since April 2020, which saw the country’s first trade deficit in more than two decades following the Covid-19 outbreak that severely disrupted global supply chains.

The most recent trade surplus that scored below the RM10 billion mark was in August last year, at RM5.67 billion.

“At this juncture, we do not expect the current account to turn into a deficit this year provided the global trade outlook holds up a moderate growth momentum and the global economy remains on track for a soft landing.

“However, there are risks for a narrower current account surplus in 2025 given the potential peak of the E&E cycle, as well as wider net imports of crude oil and refined petroleum products,” it said.

UOB Global Economics estimated the current account surplus to reach RM35 billion, accounting for 1.7% of the country’s gross domestic product (GDP), lower than the government's official forecast of RM49 billion, or 2.3% of the GDP.

For 2024, the country’s current account surplus stood at RM32.8 billion, increased from RM28.2 billion in 2023, thanks to robust exports and tourism activities. As a percentage of GDP, the surplus was also higher at 1.7% in 2024 than 1.5% in 2023.

While Malaysia’s exports are not spared from the impact of US tariff policies, the country’s neutral stance and diversified trade relationships position it well to navigate these challenges, said RHB Research.

RHB Research said Malaysia’s export-oriented industries stand to benefit from a positive global economic outlook, supported by easing global monetary conditions and resilient growth in major economies.

However, it cautioned that uncertainties surrounding tariff trajectories and broader impacts of supply chain disruptions and inflationary pressures could still weigh on trade performance.

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Malaysia's export growth decelerates in January, trade surplus shrinks sharply, official data show