21-7-2023 (KUALA LUMPUR) Economists have predicted a challenging outlook for Malaysia’s exports in the near term, attributing the pressure to sluggish global economic activities.
UOB Global Economics & Markets Research released a note on Friday, maintaining its view that Malaysia’s export contraction trend is likely to persist for the majority of the second half of the year. The unfavourable base effects, subdued global demand, and easing global commodity prices are identified as contributing factors to this slowdown.
The year-to-date decline of 4.5 percent in exports further supports the research firm’s 2023 full-year export forecast of -7 percent, indicating ongoing challenges in the international trade landscape.
In June, Malaysia’s exports recorded a significant decline of 14.1 percent year-on-year, amounting to 123.98 billion ringgit (27.23 billion U.S. dollars), driven by weaker global demand.
Comparatively, Malaysia’s exports experienced robust growth of 24.9 percent year-on-year in 2022. However, the Malaysian Central Bank’s projection of 1.5 percent export growth for this year appears uncertain in light of the current economic climate.
MIDF Research, taking into account the weak first-half performance, has maintained its projection of a 3.4 percent decline in Malaysia’s exports for the entire year. While the turnaround in electrical and electronic (E&E) products exports and improvements in the global manufacturing sector could be potential supporting factors in the second half, the overall trade outlook remains less promising than the previous year due to the anticipated slowdown in global demand, particularly from developed markets like the United States and Europe.
PublicInvest Research also shares a similar view, foreseeing persistently challenging conditions for Malaysia’s exports in the near term. The research firm anticipates a downward trajectory throughout the rest of the year, expecting a decline of 6.3 percent in export figures. The manufacturing sector in Malaysia faces various challenges, including weakened global demand and evolving dynamics within the semiconductor landscape, affecting export growth.
Over the medium term, there is hope for Malaysia’s trade prospects if China continues to invest foreign direct investment into the country’s industrial sector, according to PublicInvest Research.
Maybank Investment Bank expects a 2 percent decline in Malaysia’s full-year exports. The research house notes a 4.5 percent year-on-year drop in exports six months into the year, highlighting the headwinds from economic downturns in the United States and Europe, which have led to lower exports to these regions.
Affin Hwang Investment Bank shares the concerns about Malaysia’s external demand performance. Amid an uncertain outlook for the global economy, the bank predicts weak trade conditions. While inflationary pressures have slowed in most advanced economies, underlying price pressures remain sticky, potentially leading to further monetary policy tightening, especially in advanced economies. The rising global financial risks have also added to downside risks for the global economy.
Echoing similar sentiments, Hong Leong Investment Bank Research projects further deterioration in global demand for goods and services this year, influenced by the lagged impact of interest rate hikes and increased global cost of living. As a result, Malaysia’s trade performance is expected to remain weak in the coming months, impacted by high base effects and muted global demand conditions. The research house maintains its 2023 GDP forecast at 4.5 percent year-on-year.
With uncertainties lingering in the global economic landscape, Malaysia’s trade sector faces significant challenges ahead, requiring careful monitoring and strategic measures to navigate the current market conditions.
