Economists See Malaysia’s Exports to Remain Under Pressure in Near Term

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Economists have foreseen Malaysia’s exports to remain under pressure in near term due to slow global economic activities.

UOB Global Economics & Markets Research said in a note on Friday that it maintained its view that the export contraction trend in Malaysia will likely persist for the greater part of the second half as a result of the unfavorable base effects, subdued global demand and easing global commodity prices.

“The 4.5 percent year-to-date decline also suggests that our 2023 full-year export forecast of -7 percent remains valid,” it said.

Malaysia’s exports fell 14.1 percent year on year to 123.98 billion ringgit (27.23 billion U.S. dollars) in June on weaker global demand.

Malaysia’s exports surged 24.9 percent year on year in 2022. The Malaysian Central Bank had projected the country’s exports to grow 1.5 percent this year.

Given the weaker performance in the first half, MIDF Research maintained its projection that Malaysia’s exports will decline by 3.4 percent this year.

According to the research house, turnaround in electrical and electronic (E&E) products exports and the global manufacturing sector could be positive factors to support trade outlook in the second half.

However, it opined the anticipated slowdown in global demand, particularly from developed markets like the United States and European countries, will keep trade outlook less encouraging than last year.

In the near term, PublicInvest Research also anticipated a persistently challenging environment for Malaysia’s exports, with a downward trajectory expected to persist throughout the remainder of the year.

“Our outlook points towards a contraction in export figures, with expected decline of 6.3 percent,” it said.

It said that the manufacturing sector in Malaysia is currently facing a series of challenges that are expected to hamper export growth, primarily due to weakened global demand and evolving dynamics within the semiconductor landscape.

However, over the medium term, it expects that Malaysia’s trade prospects will flourish if China continues to channel foreign direct investment into Malaysia’s industrial sector.

Maybank Investment Bank, on the other hand, expects Malaysia’s full-year exports to decline by 2 percent.

According to the research house, six months into the year, exports dropped by 4.5 percent year on year, pointing to headwinds from the economic downturns in the United States and Europe given the lower exports to both regions.

In the months ahead, Affin Hwang Investment Bank also believes the performance of Malaysia’s external demand will remain weak amid an uncertain outlook on the global economy.

Despite the slowing inflationary pressure in most of the advanced economies, it opined that the underlying price pressures remain sticky, potentially signaling further tightening in monetary policy, especially in advanced economies.

Furthermore, it said downside risks to the global economy have increased due to uncertainties from rising global financial risks.

Hong Leong Investment Bank Research also said that global demand for goods and services is anticipated to further deteriorate this year, likely due to the lagged impact of interest rate hikes and the increased global cost of living.

“Consequently, Malaysia’s trade performance is also anticipated to remain weak in coming months due to high base effect and muted global demand conditions. We maintain our 2023 GDP forecast at 4.5 percent year on year,” said the research house.