• Exports fell back to double-digit decline of 10.0% YoY

• Imports grew for second month to 2.9% YoY

• Trade surplus edged lower to RM11.8bn in December

• Global trade continued to expand at a slower pace

• The expected rebound in tech cycle could support exports recovery in 2024

Summary

Malaysia's total trade faced a continuous decline in December 2023, marking the 10th consecutive month of downturn since March 2023 as total trade fell by 4.3% YoY to RM225.1bn, attributed from lower exports which edged down by 10.0% YoY to RM118.5bn while imports recorded the highest monthly value in the month of December, rising by 2.9% to RM106.7bn. Meanwhile, Malaysia recorded the 44th consecutive month of trade surplus since May 2020, amounting to RM11.8bn, shrank by 57.8 per cent in December 2023. On a month-on-month basis, trade, exports, imports and trade surplus dipped by 2.6%, 2.7%, 2.6% and 3.6%, respectively. In 2023, Malaysia’s trade exceeded RM2tn for the third consecutive year to reach RM2.637tn, decreased by 7.3% compared to 2022 in tandem with slower global demand, lower commodity prices, geopolitical uncertainties, high inflation rate, downcycle in the semiconductor sector and high base effect last year. Exports contracted by 8.0% to RM1.426tn and despite the decline, this was the third successive year that exports exceeded RM1tn and achieved 82.4% of target set for 2025 under the Mid-Term Review of the 12MP. Meanwhile, imports in 2023 posted another milestone by crossing RM1tn mark for the second time, weakened by 6.4% to RM1.212tn compared to 2022. Malaysia continued to register trade surplus for 26th successive year since 1998, amounting to RM214.1bn.

Total trade for 4Q23 amounted to RM695.6bn, a decrease of 3.2% from 4Q22. Exports dipped by 6.9% to RM366.28bn. Imports recorded the highest quarterly value for the fourth quarter thus far, expanding by 1.3% to RM329.35bn. This resulted in a trade surplus of RM36.93bn, a contraction of 45.9%. However, compared to 3Q23, trade, exports and imports expanded by 6.5%, 2.8% and 10.8%, respectively while trade surplus reduced by 37.3%.

Exports fell back to double-digit decline. Exports reverted to a double-digit decline of -10.0% YoY (Nov: -6.1%), extending the year-on-year contraction for the 10th straight month, in line with the decline by both re-exports and domestic exports. Re-exports amounted to RM21.2bn, shrank by 20.3% YoY. Domestic exports worth RM97.3bn, contributing 82.1% to total exports, dropped by 7.4% YoY.

December’s export weakness was largely due to lower shipments of manufactured goods (Dec: -10.3%; Nov: -6.7%) and agriculture goods (Dec: - 25.9%; Nov: -6.0%). This fully offset a rebound in exports of mining goods (Dec: +9.1%; Nov: -2.3%).

Exports of manufactured goods, constituting 83.6% or RM99.0bn of total exports, slipped by 10.3% YoY as a result of sluggish demand for electrical & electronics (E&E) products (Dec: -12.1%, Nov: -13.7%); refined petroleum products (Dec: -22.2%, Nov: +8.2%); transport equipment (Dec: -40.4%, Nov: - 42.9%); as well as chemicals & chemical products (Dec: -12.7%, Nov: -15.7%). Declining exports of agriculture goods (6.9% of total exports) was mainly attributed to lower shipments of palm oil & palm oil-based agriculture products (Dec: -31.3%, Nov: -10.8%) amid lower prices of palm oil during the month. Meanwhile, increased exports of mining goods (8.8% of total exports) were primarily driven by higher shipments of crude petroleum (Dec: +35.1%, Nov: +15.6%).

In terms of destinations, exports to the EU (Dec: -25.5%, Nov: -6.9%) marked the largest decline, followed by Singapore (Dec: -24.8%, Nov: -17.0%), US (Dec: - 5.1%, Nov: -8.7%) and China (Dec: -1.5%, Nov: -8.4%). Exports to ASEAN countries constituted 28.0% of Malaysia's total exports in December, declined by 12.6%.

Imports grew for second month. Imports grew stronger at 2.9% YoY in December (Nov: 1.5%), the second straight month of growth. The growth was underpinned mainly by higher imports of intermediate and capital goods. Imports of intermediate goods rebounded by 10.1% (Nov: -5.6%) while imports of capital goods jumped for the third consecutive month by 24.6% (Nov: 51.3%). In contrast, imports of consumption goods reversed course and fell marginally by -0.7% (Nov: 2.4%). By sector, increased imports were mainly driven by higher imports of manufactured goods, which grew by +2.3% YoY. Mining goods imports (+7.7%) and imports of agriculture products (+ 9.8%) also contributed to the import growth in December 2023

Lower trade surplus. Trade surplus dropped to the lowest level since May 2020 at RM11.8bn in Dec (Nov: +RM12.2bn). This brings the cumulative amount to RM36.9bn in 4Q23 (3Q23: RM58.9bn) and RM214.1bn in 2023 (2022: RM256.2bn).

Global trade continued to expand at a slower pace

Global trade continued to expand at a slower pace, weighed down by several factors including lower commodity prices, geopolitical uncertainties, high inflation rate and downcycle in the semiconductor sector.

China’s exports expanded for the second straight month, rising 2.3% YoY in December, compared with a 0.5% increase in November. In 2023, China’s exports contracted by -4.6% compared to gains in 2022 of 7.0%. Meanwhile, ASEAN’s trade-reliant economy continued to see mixed trend in exports. Singapore’s non-oil domestic exports (NODX) worsened in December 2023, posting a -1.5% YoY contraction (Nov: +1.0%). For the full-year, NODX contracted by -13.1% in 2023, sharper than the official estimate of “-12.5% to - 12.0%”. Indonesia’s exports grew 1.9% MoM in December but still contracted on an annual basis by -5.8% YoY.

OUTLOOK

For the full year of 2023 Malaysia’s exports plunged the most since 2009 by 8.0% (2022: +24.9%), while imports shrank by 6.4% (2022: +31.0%), marking the largest decline since 2009.

Malaysia’s trade performance is expected to recover in year 2024. We maintain our 2024 forecast exports and imports to rebound and grow at 4.1% (2023: -8%) and 3.9% (2023: -6.4%). Apart from the turnaround in the global E&E market, we expect continued economic growth in China and the US will support export growth this year. Recovery will be partly driven by base effects given the downturn in 2023 but monthly momentum could remain fundamentally weak in 1H24 as external demand continues to be weighed down by tight financial conditions stemming from an elevated interest rate environment. Geopolitical developments in the red sea region may also inflict some temporary supply chain disruptions/delays in 1H24. Towards the middle of 2024, signs of a broader recovery in manufacturing could emerge. Continuous demand for E&E products this year will be supported by an upcycle trend in the sector aligned with the projection made by World Semiconductor Trade Statistics (WSTS) that global semiconductor sales to rebound by 13.1% in 2024. Nevertheless, global trade may still be impacted by key factors such as global uncertainties arising from prolonged geopolitical tensions, disruption in global supply chains and uncertainties in commodity prices.

Table 4: Malaysia’

Source: BIMB Securities Research - 22 Jan 2024