This article first appeared in The Edge Malaysia Weekly on February 16, 2026 - February 22, 2026

IN 2025, Malaysia recorded RM1.61 trillion in exports, up 6.45% from RM1.51 trillion in 2024. However, re-exports outperformed domestic exports, indicating that headline export growth numbers do not necessarily reflect higher demand for Malaysian-made goods.

The headline total export growth of 6.45% is considered decent, but it was led by a 24.95% expansion in re-exports, while domestic exports only grew 2% during the year (2024: +9.4%). Re-exports made up about 23% of Malaysia’s total exports, or RM366.39 billion.

This shows that much of the growth in Malaysian exports was not of goods made or produced in Malaysia, but rather those imported and repackaged, sorted or graded in the country without any transformation process.

Re-exports too grew to become more significant as a percentage of total exports in 2025, at 22.8% compared with 17.24% in 2019, 18.77% in 2020, 18.45% in 2021, 21.16% in 2022, 22.1% in 2023 and 19.43% in 2024.

Are Malaysian producers losing competitiveness in the global market?

“I don’t see it that way since semiconductor is our main forte and it is still growing,” says Dr Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, when asked about the diverging fortunes of the types of exports.

To be fair, domestic export growth was dragged down by lower exports of commodities, such as liquefied natural gas (LNG) and crude petroleum, while manufactured goods, especially electrical and electronics (E&E), surged during the year.

However, some manufactured goods, especially petroleum products and chemical and chemical products, also declined during the year as a result of weak global demand for these types of goods.

Overall manufacturing exports rose 7.7% in 2025, underpinned by a robust surge of 18.4% in E&E exports, which anchored headline performance amid the ongoing tech up cycle, BIMB Securities notes in a Jan 21 report.

Optical and scientific equipment also recorded solid growth of 10.9% in 2025, supported by rising demand for higher value precision and medical products, while machinery and equipment exports remained resilient (+13.5%), reflecting investment-led activity and continued supply chain reconfiguration, says the research house.

In contrast, petroleum products (-18.7%) and chemicals (-11.4%) were notable drags, weighed down by softer prices, margin normalisation and weaker downstream demand.

“Overall, 2025 underscored a two-speed manufacturing sector, with the tech-linked and capital goods segments outperforming, while energy- and chemical-related industries lagged,” it adds.

Exports of E&E surged 18.4% year on year (y-o-y) to RM711.6 billion, from RM601.6 billion in 2024, while petroleum product exports dropped 18.7% y-o-y to RM103.55 billion from RM127.33 billion in 2024. Chemical and chemical products declined 11.4% y-o-y to RM65.2 billion.

Petroleum products only made up 6.45% of Malaysia’s total exports of RM1.61 trillion in 2025, while chemical and chemical products made up around 4%. LNG, of which RM51.63 billion worth was exported last year, amounted to 3.2% of Malaysia’s total exports.

Afzanizam agrees that the export performance of the country in 2025 was mixed. “This warrants a policy response in the sense of how the country should diversify its product mix. Plus, the trade surplus balance was only contributed by a handful of industries, such as E&E,” he says.

“Since the government is aiming for economic complexity, diversifying into different products and ensuring more downstream activities would be the best way to avoid over-concentration risks.”

In 2025, the ringgit outperformed most of the currencies of its trading partners, including the US dollar, with the local currency emerging as the best performing in Asia. It appreciated 10.3% from RM4.472 against the greenback at end-2024 to RM4.056 at end-2025.

Did the ringgit’s strength cause the dismal 2% growth in domestic exports in 2025?

With the ringgit continuing to strengthen so far this year, reaching 3.9185 against the US dollar on Feb 11, there is a concern that the appreciation in the value of the local currency has been too rapid for the economy to adjust accordingly.

According to Afzanizam, there are two sides of the same coin when it comes to a strong currency. Companies importing raw materials and procuring foreign services are benefiting from the strong ringgit, while export-oriented companies suffer.

“Nonetheless, exporters have been focusing on operational excellence such as automation and digitalisation. In addition, they can enter the derivatives market to hedge their position. Perhaps, if the currency appreciation is gradual, I believe the economy can adjust,” he says.

He adds that the ringgit has been underperforming for quite some time and foresees the local currency appreciating further. After the currency peg was removed in July 2005, the ringgit continued to gyrate, trading between 2.9390 on July 27, 2011, and 4.7987 on Feb 20, 2024.

“The market landscape has changed, especially how traders and investors perceive the US dollar’s status as a safe haven. We have observed foreign holdings in US Treasury bonds have declined,” says Afzanizam.

“For instance, China’s holding peaked at US$1.3 trillion in 2011 and hovered at around US$682.6 billion as at November 2025. Japan’s holding lingers at around US$1.2 trillion, from US$1.32 trillion in 2021. Russia and Venezuela have effectively zeroised their holdings.”

He adds that there has been a fundamental shift in the US dollar’s status as a safe haven, especially when the US government’s sovereign credit is no longer AAA-rated.

“If we look at the long-term average of USD/RM since the country removed the currency peg on July 21, 2005, the average stands at 3.8222. Hence, that could be the guidance in terms of the near-term direction,” says Afzanizam.

While the ringgit plays a role in the competitiveness of Malaysia’s exports, it is the US tariffs that would have a greater impact on growth, he says. Export growth this year could be slower than the 6.5% in 2025 due to the full implementation of US tariffs, he adds.

However, key products such as semiconductor-related ones could still cushion slowing export growth, in view of higher capital expenditure among technology firms globally, says Afzanizam.

“The World Semiconductor Trade Statistics (WSTS) has projected a growth of 26.3% in global semiconductor sales for 2026, from an estimated growth of 22.5% in 2025. This will be largely driven by higher sales of integrated circuits of 29% in 2026, compared with 25.6% in 2025,” he adds.

“On that note, we project export growth to moderate around 4.5% to 5.0% in 2026, led by manufacturing-related sectors, especially the E&E industry.”

RHB Global Economics and Market Research is also optimistic about exports in 2026, with some caution regarding potential changes in tariff policies and their implications for regional trade dynamics. The research house says in a Feb 10 report that export performance in 2026 will be driven by three key trends, namely strong global and regional growth, developments in US tariff policies and the resilience of E&E exports.

“Accelerating global GDP and robust Asean expansion should support Malaysia’s key exports, particularly E&E, machinery and commodities. Sustained global demand driven by artificial intelligence and emerging technologies is expected to continue supporting Malaysia’s semiconductor exports,” it adds.

While there are concerns that the full implementation of US tariffs could jeopardise Malaysia’s exports, RHB Research notes that roughly 64% of Malaysia’s exports to the US are exempted from the reciprocal tariff of 19%.

This includes machinery and electrical equipment, where tariff exclusions account for 55.8% of exports to the US; precision instruments, furniture and miscellaneous goods (2.7%); animal or vegetable fats and foodstuffs (1.4%); and chemicals and allied industries (1.3%).

Overall, the exemption structure is skewed toward Malaysia’s highest-value and most-export-oriented products to the US, reinforcing the reciprocal tariff’s positive impact on sectors in which Malaysia already has strong market penetration, says the research house.

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