KUALA LUMPUR (June 20): Malaysia’s exports are expected to continue recovering this year, driven by an upturn in the global technology cycle and rising commodity prices, following a better-than-expected performance in May, according to economists.

UOB Global Economics & Market Research maintained its 2024 export growth projection at 3.5%, primarily driven by improvements in electrical and electronics (E&E) exports, a gradual global economic recovery, a sustained rebound in China's economy, and anticipated global monetary policy easing by year end.

However, UOB cautioned that Malaysia may still face significant challenges from persistent logistical issues, ongoing geopolitical tensions, and regional conflicts. 

The Red Sea crisis and Middle East conflicts have already led to delays and increased shipping costs in certain sectors. Additionally, environmental concerns, such as low water levels in the Panama Canal - one of the world’s key shipping routes - pose similar risks to the global trade outlook, it said.

“Overall, we hold the view that Malaysia’s external trade continues to recover at a gradual and bumpy pace in the near term. The two consecutive months of positive gains in exports suggest that trade weakness has bottomed out.

“The Malaysian government’s bold and effective implementation of various national master plans, including the Semiconductor Strategic Plan, will be additional catalysts to the trade prospect in the short and medium term,” the research firm said in a note.

Malaysia’s exports grew 7.3% in May compared to a year earlier, sharply above the median estimate of a 2.3% year-on-year (y-o-y) increase from a Bloomberg survey of economists.

This growth was driven by a surge in shipments of E&E products and palm oil, particularly to the US. In April, exports rose 9.1% y-o-y.

Imports also grew 13.8% driven by the increase in intermediate, capital and consumption goods, data from the Ministry of Investment, Trade and Industry showed on Thursday.

MIDF Research, meanwhile, maintained its growth projections for exports at 5.2% and imports at 4.4%. The research firm expects the ongoing expansion in E&E trade and recovering external demand to continue to support export growth this year.

Moreover, increased investment activities and inventory restocking in anticipation of rising demand are expected to help imports recover from last year’s declines of 6.4%, MIDF said.

Echoing a similar view, RHB Investment Bank kept its positive view for Malaysia’s trade outlook in 2024 due to resilient economic growth momentum in major economies, upsides in commodity prices, and re-acceleration in the global technology cycle. “Our view is further reinforced by recent developments such as upbeat trade performance for the month of May, coupled with improvement in the manufacturing sector sentiment and investment appetite,” it added. 

https://www.theedgemarkets.com/node/716158