KUALA LUMPUR (April 20): Malaysia’s slower-than-expected export growth in March points to rising external headwinds from the Middle East conflict, with the likelihood of higher shipping costs, supply chain disruptions and weaker global demand weighing on trade momentum in the months ahead despite resilient electronics demand, economists said.
The country's exports rose 8.3% year-on-year in March 2026 to RM148.8 billion, according to the Department of Statistics Malaysia on Monday. The print was below the 14% median estimate in a Bloomberg survey and slower than the revised 13.6% increase in February.
Economists said the flare-up in West Asia has become a key variable for Malaysia’s trade outlook, particularly if tensions escalate further or disrupt traffic through the Strait of Hormuz, a major global energy chokepoint.
While the ongoing artificial intelligence (AI) upcycle should continue to support Malaysia’s trade prospects this year, “renewed Middle East tensions — particularly the potential prolonged closure of the Strait of Hormuz — have heightened downside risks to global growth and demand”, UOB Global Economics & Markets Research wrote in a note.
It added that higher input costs and supply chain disruptions across oil and non-oil materials “may weigh on near-term exports and production despite easing US tariff concerns”. UOB maintained its cautious 2026 export growth forecast at 2.5%.
Meanwhile, RHB Investment Bank said the direct impact of the conflict on Malaysia should remain manageable for now, given the country’s relatively low trade exposure to the region.
“The direct impact of Middle East geopolitical tensions on Malaysia’s exports and manufacturing sector is anticipated to remain limited, given the country’s relatively low trade exposure to the region,” it said, noting trade with Iran accounts for only 0.1% of Malaysia’s total trade while the broader Middle East region makes up about 4.2%.
Still, RHB warned that in a more adverse scenario, a prolonged escalation in US-Iran tensions and a surge in crude oil prices could dampen global growth and trade, causing spillovers to Malaysia’s export-oriented sectors through weaker demand and possible supply chain disruptions. It kept its 2026 export growth forecast at 9.3%.
Kenanga Research said export performance should continue to be anchored by electrical and electronic (E&E) products, supported by sustained global demand for semiconductors linked to AI data centres, although risks remain elevated.
"Encouragingly, Malaysia’s trade data point to a strong start to the year, with 1Q2026 exports rising 12.7% despite global economic uncertainty," it noted.
The research house said the export outlook remains vulnerable to “fragile geopolitical conditions in the Middle East, potential supply-chain disruptions, persistent uncertainty over US trade and tariff policies, sticky global inflation and China’s uneven recovery”.
It maintained its 2026 export growth forecast at 5.1%, while keeping Malaysia’s 2026 GDP growth projection at 4.5%.
MBSB Research was also constructive on the medium-term outlook, forecasting exports to grow 4.5% and imports to expand by 5% in 2026, while citing upside potential from front-loading of E&E shipments ahead of phased US tariffs on a wider range of semiconductor products and the sustained global tech upcycle.
Nonetheless, it cautioned that Malaysia’s export trajectory remains vulnerable to external trade volatility, saying the outlook is being influenced by “escalating Middle East tensions” and pending global trade measures, including possible US tariff actions and manufacturing-related probes over forced labour allegations.
"With potential new retaliatory measures expected by mid-2026 from the probes if proven to be true and semiconductor-specific tariffs, the nation’s industrial outlook could be hit by new tariff measures," MBSB said.
"On another note, the sustained rise in domestic economic activities, both consumer and business spending, will continue to support growing imports," it added.