KUALA LUMPUR (Aug 21): Malaysia’s strong export performance in July denoted that the country is benefiting from the global trade diversion, according to Malaysian Rating Corp Bhd (MARC).

Its chief economist Dr Ray Choy said the ongoing trade dispute between China and other regions had a major impact on overall export performance.

“China’s purchasing managers indices (PMIs) have decelerated faster than the rest of the world, but Malaysia’s PMI deceleration is less pronounced compared to the overall worldwide.

“We see that Malaysia’s export performance is not being hit too much. This proves that we are benefiting from the global trade diversion, and this could be the baseline scenario going forward,” he said during the Economic and Market Outlook: Opportunities Amid Stronger Growth and Monetary Easing forum on Wednesday.

The online session was part of MARC’s two-day Malaysian Bond and Sukuk Conference 2024: Charting the Course for Malaysia’s Economy.

Meanwhile, the forum highlighted that the seasonally adjusted S&P Global Malaysia Manufacturing PMI fell slightly to 49.7 in July from 49.9 in June, with slowdowns seen in new orders, output, employment and stocks.

Malaysia’s exports in July beat economists’ estimates to record a 12.3% year-on-year growth to RM131.15 billion, against RM116.75 billion a year ago.

Choy pointed out that Malaysia’s exports had been resilient, thanks to the technology upcycle, evident from export growth in the semiconductor and electrical and electronics segments.

He said that Malaysia’s economy also gained from the normalisation of tourism activities.

“There has been normalisation of tourism activities in Malaysia, supported by Chinese tourists, Asean and the rest of the world, which supported consumer spending to be robust,” Choy added.

Hence, he expects Malaysia’s gross domestic product (GDP) growth to be at 4.8% this year, while the forecast for next year is 4.5%.

Choy noted, however, that the declining manufacturing and business confidence in several sectors poses some risks to Malaysia’s economic growth.

“The risks are expected to come from gross fixed capital formation and foreign direct investments (FDI), which are pretty lumpy,” he said.

Choy said that factors influencing the house's GDP growth forecast for 2025 would be the normalisation of gross fixed capital formation and FDI, as well as geopolitical uncertainties and inflation risks. 

https://www.theedgemarkets.com/node/723690