PETALING JAYA: Improving demand from international markets, together with the anticipated rebound in China’s economy and the global semiconductor market, will bode well for Malaysia’s external sector.
Despite the relapse in exports in February, with a decline of 0.8% year-on-year (y-o-y) in contrast to a growth of 8.7% y-o-y in January, economists are optimistic that Malaysia will see stronger growth in trade this year.
TA Research projected a growth of 4.8% in the country’s exports for 2024, a reverse from the decline of 8% last year, while imports would likely grow 4.7% this year, as compared to a contraction of 6.4% in 2023.“We expect trade to see an improvement throughout the year, driven by increasing demand from international markets, the projected recovery of China’s economy and a promising outlook for the global semiconductor market,” the brokerage said in its report yesterday.
Moreover, it noted that both the World Trade Organisation (WTO) and the International Monetary Fund also projected a 3.3% growth in global trade.
“These optimistic projections are fuelled by enhanced growth prospects in the world’s leading economies, notably the United States and China, which are Malaysia’s primary trading partners.
“This upward trajectory in the global economy is further bolstered by increased private and public spending, heightened labour force participation, improved supply chain resilience and favourable trends in energy and commodity prices,” TA Research explained.
CGS International Research forecasts growth of 4.3% in exports and 4.7% in imports this year, noting the recovery in the global semiconductor industry would play a pivotal role in driving a turnaround in Malaysia’s external trade.
“Additionally, the ongoing US-China tensions are likely to continue fuelling the China+1 trend – trade diversification away from China towards regional economies,” the brokerage said.
Hong Leong Investment Bank (HLIB) Research noted that although the WTO goods trade barometer index had eased slightly to 100.6 in its March release from the previous reading of 100.7, it was still above the baseline value of 100, suggesting trade activity should continue to recover in the earlier months of the year, albeit at a modest pace as geopolitical risks remain.
“In line with the global outlook, Malaysia’s trade performance is also expected to gradually recover in coming months, supported by its diversified export structure,” HLIB Research said.
Malaysia exports in February contracted 0.8% y-o-y on lower shipments of electrical and electronics, petroleum and palm oil products, amid fewer working days due to the Lunar New Year holidays. Trade surplus widened to RM10.9bil from RM10.2bil in the preceding month.
Despite its optimism on the external sector, CGS International said there were lingering downside risks, including political uncertainties linked to elections across the world and escalating geopolitical tensions, which could contribute to financial market volatility.
“These challenges are further compounded by sustained tight financial conditions that might hinder the recovery in global demand for primary commodities,” it explained.
“Nevertheless, there is anticipation that global central banks will commence easing interest rates in 2024, which could provide a much-needed boost to global demand and external trade, potentially mitigating some of these risks,” it added.
Similarly, TA Research also acknowledged the presence of potential downside risks that could impact its optimistic view on Malaysia’s external trade performance.
