This article first appeared in The Edge Malaysia Weekly on July 27, 2026 - August 2, 2026

EXPORTS put on another good show in June, expanding 45.5% year on year (y-o-y) on the back of strong demand for electrical and electronics (E&E) and energy-related products.

In the first half of the year (1H2026), export growth stood at 27.5% y-o-y, putting the cumulative trade surplus at RM147.1 billion.

It is worth noting that exports have exceeded most expectations this year, says CGS International head economist Ahmad Nazmi Idrus. Monthly nominal exports averaged about 27.6% y-o-y in 1H2026, a far cry from the average of 6.7% in 2025.

“I think mining exports will continue to remain exceptional, not least because of the price effect, but also due to some volume recovery,” Nazmi adds.

CGS International highlights in its July 20 report that energy sector exports, which grew 69.1% y-o-y in June, were supported by higher export volumes and firmer prices, suggesting that the improvement was not solely due to favourable price effects.

Nazmi believes E&E exports could surprise further on the upside in 2H2026, correlating well with global semiconductor sales.

“Global semiconductor sales have increased 100% y-o-y in the past few months, signalling that Malaysia’s E&E exports could follow suit,” he says.

The country’s E&E exports grew 56.9% y-o-y in June.

RHB Research highlights in its July 20 report that global semiconductor sales jumped 104.1% y-o-y in May to US$120.6 billion, reflecting strong demand for AI-related infrastructure and high-performance computing applications.

The US Semiconductor Industry Association projects global semiconductor sales to reach a whopping US$1.5 trillion in 2026 and exceed US$1.9 trillion in 2027, up from US$800 billion in 2025, implying significant potential for E&E exports going forward.

UOB Global Economics and Markets Research says in its July 20 report that the better-than-anticipated export performance over the past three months had revived export growth rates last seen during the post-pandemic digitalisation and automation boom, alongside the global commodity up cycle in 2021/22.

Some economists have revised upwards their full-year export projections. RHB Research raised its full-year export growth forecast to 21.7% from 15.3% while Kenanga Research increased its export growth estimate to 19% from 9.7% previously.

Maybank Investment Bank Research adjusted its full-year 2026 export forecast to 27.5% from 18.5%.

“Malaysia’s trade performance has been solid so far in 2Q2026, driven by strong E&E demand amid the ongoing AI-driven technology up cycle, in tandem with the sharp rise in global semiconductor sales, as well as the positive terms-of-trade effect from Malaysia’s position as a net energy exporter amid elevated energy commodity prices following the Middle East conflict,” the investment bank says in its July 20 report.

Clearly, the continued robust export momentum could provide a boost to gross domestic product (GDP) growth in 2H2026.

CGS International’s Nazmi opines that there is significant upside potential for GDP growth in 2H2026, given that growth in 1H2026 reached 5.6% y-o-y. “This means that to reach the upper range of Bank Negara Malaysia’s GDP growth forecast of 4% to 5%, 2H2026 growth would be capped at 4.4% y-o-y. At the current trajectory, this seems modest,” he says, adding that the central bank is likely pricing in some potential downside risks to growth.

Last Thursday, Brent crude hit US$100 a barrel following a re-escalation of tensions in the Middle East. Assuming crude oil prices continue to hover at the US$100 per barrel level for the rest of the year, this could lift exports in 2H2026 and, by extension, economic growth.

“If oil prices stay at current levels [about US$100 a barrel] for the rest of the year, the uplift from prices alone is nearly 40%. Hence, there will be a boost to exports, provided that volumes are sustained. Mining output depends on field capacity, maintenance schedules and global prices, all of which can be lumpy,” says UOB senior economist Julia Goh.

OCBC Bank senior Asean economist Lavanya Venkateswaran says higher Brent crude prices alone present a mixed situation for Malaysia.

“The economy is a net importer of crude petroleum, which could worsen terms of trade. However, as a net commodity exporter, if higher global crude prices also lift other commodity prices such as crude palm oil, rubber and liquefied natural gas, the net impact on the trade balance will likely be positive,” she explains.

Nevertheless, Lavanya warns that the bigger vulnerability for Malaysia from higher global oil prices lies in the impact on the government’s finances, given its subsidies for RON95 petrol and diesel. She says that while stronger oil prices are likely to have an impact on exports in the near term, the balance of risks depends on whether other commodity prices also rise in tandem with oil prices.

As for Malaysia’s 2H2026 exports, she says the biggest upside continues to come from tailwinds stemming from the global semiconductor up cycle.

In other recent developments, the US announced tariffs of 10% to 12.5% on 60 economies last Friday over allegations of imports made by forced labour, replacing the previous global tariff of 10% that was struck down by a US court.

Malaysia was slapped with a 10% tariff.

Lavanya says the imposition of tariffs under Section 301, which replaces the earlier tariffs imposed under Section 122 earlier this year, would have a limited impact on Malaysia’s export growth in 2H2026, given that exemptions for US imports of semiconductors and other key electronics products from Malaysia remain in place.

UOB’s Goh concurs, saying that Malaysia’s 10% tariff rate positions the country at a relative advantage compared with others that have been slapped with a higher tariff rate. Singapore, for instance, faces a tariff of 12.5% on its exports to the US.

“Malaysia’s semiconductor-heavy export basket, particularly electronic integrated circuits, is relatively better insulated because of its strategic importance in global technology supply chains. However, we will need to watch for other potential tariff investigations, such as those involving excess capacity and sectoral tariffs,” she adds. 

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