Global E&E, commodity demand will support Malaysian exports: Research house

Malaysia’s near-term outlook for production and trade can be constrained by prolonged disruption in the global supply chain and increased inflationary pressures, but the continued expansion in global demand for electrical and electronic products (E&E) and commodities will support overall export outlook, while the reopening of economies will facilitate growing trade activity this year.

MIDF Research, which maintained its growth forecast for exports and imports at 7.8% and 9.6%, respectively, said the external trade numbers continued to surprise on the upside in March, driven by the jump in mining exports on top of stronger E&E exports. This shows Malaysia, as a commodity-exporting country, stands to benefit from the rising prices.

“However, we are still cautious on the outlook going forward given the extended lockdown and slowdown in China and ongoing Russia’s military action in Ukraine,” it said in a report.

Malaysia’s total trade grew faster than expected (+27.3% y-o-y) to a new monthly high of RM236.6 billion in March, driven by stronger growth in both exports and imports. Export growth jumped to +25.4% y-o-y, above market’s expectations, backed by demand for E&E and commodities, particularly liquefied natural gas, crude and refined petroleum, and palm oil and palm oil products.

Meanwhile, UOB Research, to reflect the robust export growth of 22.2% in first-quarter 2022, has raised its full-year export growth forecast to 8.0% (from 2.0%; Bank Negara Malaysia estimate: 10.9%; 2021: 26.0%), suggesting moderation ahead.

“We remain cautiously optimistic on Malaysia’s overall trade outlook in the near term given prevailing risks from geopolitical risks, China’s zero-Covid policy, ongoing supply chain disruptions, and tighter global financial conditions. While there is limited first order impact on Malaysia from the near two-month long Russia-Ukraine conflict, the risk of second order impact has emerged following the expansion of sanctions on Russia by the Western nations and Russian President Vladimir Putin last Tuesday (April 12) vowed to continue the invasion of Ukraine until his goals are fulfilled.”

UOB said Malaysia would be affected by higher cost pressures and via indirect trade channels, especially if growth prospects of its key trading partners (the US, the European Union and China) are impacted by the heightened geopolitical risks.

“Our sensitivity analysis suggests that a 1.0% drop in global trade translates to a 1.2% decline in Malaysia’s trade, with a 0.9% drop in exports and 1.1% decline in imports.

“From a statistical point of view, yearago high base effects suggest that Malaysia’s export growth momentum will soften over the course of the year. The sharp pick-up in March reversed the downtrend since its last peak in November 2021. The upturn in March could be partly attributed to pick-up following seasonal effects in JanuaryFebruary, higher export and import prices due to the commodity price surge, and potential trade diversification,” it said.