Economists See Lackluster Growth for Malaysia’s Exports on Softening Global Trade

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Research houses here said on Monday they foresaw lackluster growth for Malaysia’s exports due to softening global trade.

UOB Global Economics and Markets Research said in a note that there are no signs of trade rebounding as yet for Malaysia given risks ranging from softening global growth momentum, increasing trade restrictions to climate shocks.

It noted the possibility of a slightly more restrictive policy path in the developed markets would further tighten global financial and credit conditions that will subsequently weigh on global trade.

It also said the contraction of Malaysia’s manufacturing purchasing managers index and the lackluster imports of intermediate goods for five straight months, suggest that the current soft path in exports and production still has some way to go before demand recovers fully.

“All above-mentioned factors coupled with unfavorable base effects continue to reinforce our 2023 full-year export outlook at a contraction of 7 percent,” said the research house.

Having said that, it said rebounding global energy prices and currency weakness could be silver linings to the overall export performance from the price earnings perspective in the coming months.

Malaysia’s exports grew 24.9 percent year on year in 2022. The Central Bank of Malaysia estimated the Southeast Asian country’s exports to grow 1.5 percent in 2023.

Meanwhile, Malaysian Industrial Development Finance (MIDF) Research said in a note that it has revised down Malaysia’s projections for both imports and exports to fall sharper at 6.9 percent from the previous forecast of 3.4 percent and 6.4 percent, respectively, because recent data pointed to continued weakness in international trade.

The final demand from advanced markets such as the United States and Europe is expected to weaken, it said, adding this gives support for subdued demand in the latter part of the year.

It also said the weakening demand will be due to the effect of high interest rates on consumer spending following policy tightening by monetary authorities.

Last Friday, the Ministry of Investment, Trade and Industry (MITI) announced that Malaysia’s exports fell 13.1 percent year on year in July, dragged by softer global demand and lower commodity prices.

For the period from January to July, Malaysia’s exports decreased by 13.1 percent year on year.