KUALA LUMPUR (July 18): Economists are anticipating that Malaysia’s trade performance will be underpinned by a resurgence in the global technology cycle, resilient economic growth in major economies and potential increases in commodity prices.

Export-oriented sectors, such as electrical and electronic (E&E) products and commodity-based goods, are expected to benefit from brighter global growth prospects, according to RHB Bank’s Economic and Market Strategy report.

RHB said E&E export momentum has shown signs of sustained improvement in the first few months of the year. The global semiconductor market posted a remarkable year-to-date performance with a double-digit increase of 19.3% year-on-year (y-o-y) in May 2024, driven by strong growth in the Americas and Asia-Pacific regions.

“We maintain our positive outlook for Malaysia’s trade in 2024 despite slower-than-expected export growth in June. One isolated data point in June might not provide sufficient information to alter our optimistic view, as Malaysia’s export foundation remains robust,” the research house said.

June’s data showed that export growth decelerated for the second consecutive month to just 1.7% y-o-y or RM126.05 billion, from RM123.94 billion, undershooting Bloomberg’s consensus estimate of 3.3%. Economists attributed the slowdown to sluggish exports of manufactured and agricultural goods amid high base effects from the previous year.

In addition to the technology upcycle, RHB said the exports of commodities, such as petroleum and petroleum-based products and non-metal mineral and metal products, are expected to gain from higher commodity prices, likely spurring export earnings amidst higher global demand.

However, UOB Global Economics & Market Research cautioned that the exports of commodity products, particularly mining goods, will remain subject to potential production shocks due to plant closures for maintenance and persistent fluctuations in global commodity prices.

Still, the research house kept its full-year export growth forecast at 3.5%, citing a recovery in world trade amid a soft landing in the global economy, lingering logistic challenges and ongoing geopolitical risks. It said the upside risk for exports could come from a "more robust improvement in E&E exports" and commodity related products with higher price earnings in the coming months.

"Higher new orders were seen from customers in a range of Asia-Pacific destinations, including Australia, the Philippines and Vietnam. The seventh month of double-digit improvement in Malaysia’s imports of intermediate goods also points to further recovery in the export sector albeit bumpy in the near term," it added.

Likewise, MIDF Research said it continues to expect the momentum for export growth to improve in the latter part of the year, anticipating a recovery in E&E exports would be more encouraging in 2HFY2024 as Malaysia benefits from the improvement in the global E&E market.

On import performance, MIDF noted that excluding February 2024, Malaysia’s imports have grown at double-digit rates since January 2024. Imports maintained double-digit gain at 17.8% in June, particularly due to stronger imports of intermediate goods (37.2% y-o-y).

The research house upgraded its import growth forecast to 11.2%, as it predicts a quicker turnaround given the robust import growth of 13.8% y-o-y in 1HCY2024 compared to exports growth of 3.9% y-o-y.

Meanwhile, trade surplus hit a nine-month high of RM14.3 billion in June.

“For the entire year of 2024, we project the current account surplus to reach RM39 billion or 2% of gross domestic product (GDP), in line with Bank Negara Malaysia’s (BNM) estimation of RM41.5 billion or 1.8%-2.8% of GDP. This is higher than the RM28.2 billion or 1.5% of GDP recorded in 2023, reflecting an expected recovery in the trade sector this year,” UOB said.