The country’s trade surplus in November 2023 shrank to the lowest level in three-and-half years.
PETALING JAYA: Malaysia’s latest trade figures fell below market predictions, sparking concerns about the possibility of a prolonged trade weakness heading into 2024.
The country’s trade surplus in November 2023 shrank to the lowest level in three-and-half years, as exports to the top five markets declined amid a slowdown in global demand.
The last time the trade surplus hit such a low was when businesses were shut down in compliance with the movement control order in May 2020.
Total trade also fell for the ninth month in a row, after shipments to the United States and China saw sharper contractions in November.
While Malaysia is not the only country affected by persisting soft exports, the 43% year-on-year (y-o-y) slump in November’s trade surplus was too big to ignore.
The fact that the International Monetary Fund forecast a slower global growth of 2.9% in 2024, well below the historical 2000 to 2019 average of 3.8%, puts the external demand-reliant Malaysia in a tight position.
For now, analysts are still betting on the Malaysian trade to recover in 2024, although it could well be a bumpy road to recovery ahead.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid expects a “decent” export growth by early 2024 as the high base effects of 2022 and early 2023 wear off.
Additionally, the talks of possible interest rate cuts in the United States could spur some optimism in the global economy, he told StarBiz.
“Perhaps, economic stimulus from China could also instill expectations that the second largest economy would remain steady in 2024,” said Mohd Afzanizam.
Socio Economic Research Centre (SERC) executive director Lee Heng Guie also said that exports are likely to recover gradually in the first six months of next year.
This is on the back of a bottoming technology and electronics demand downcycle.
“Generative artificial intelligence, electric vehicles and a recovery in personal computers and 5G smartphones will provide some tailwinds to the chips industry in 2024.
“Crude palm oil and crude oil prices are expected to increase moderately at RM4,000 per tonne in 2024 (estimated RM3,850 in 2023) and US$84 per barrel in 2024 (estimated US$82.50 per barrel in 2023).
“Overall, we estimate exports to increase by 4% in 2024 compared to an estimated decline of 7.4% in 2023,” he said.
Meanwhile, MIDF Research continues to expect an upside bias in the final quarter of 2023 such as a stronger demand from China and turnaround in electrical and electronics (E&E) trade.
These factors would cap the decline in Malaysia’s exports in 2023 and not as steep as the research house estimated previously.
“Going into next year, we foresee the momentum for external trade recovery will continue,” it said.
Nevertheless, MIDF Research cautioned that factors such as significant slowdown in final demand from the advanced economies, worsening of geopolitical and trade tensions and elevated price pressures, could adversely affect global trade outlook.
The Statistics Department reported yesterday that Malaysia’s exports in November 2023 declined by 5.9% y-o-y to RM122.1bil.
The decline was worse than the market’s median estimate of 5.2%, as polled by Bloomberg.
The fall in exports was attributable mainly to lower demand for E&E products, amid modest global growth and vulnerability in external demand for goods from Malaysia.
The slower exports was mainly attributable to the decline in shipments to Singapore (down by RM3.7bil), followed by Japan (down by RM1.6bil), China (down by RM1.6bil), Hong Kong (down by RM1.2bil) and the United States (down by RM1.2bil).
On the contrary, imports rebounded by 1.7% y-o-y to RM109.7bil, after eight consecutive months of decline.
Higher imports were mainly contributed from Singapore (up RM2.4bil), followed by Saudi Arabia (up RM1.4bil), the United States (up RM1bil) and Thailand (up RM545.7mil).
Total trade shrank by 2.4% y-o-y to RM231.8bil.
Trade surplus, which is the difference between a country’s exports and imports, was recorded at RM12.41bil, which was the lowest since May 2020.
It is, however, noteworthy that this was the 43rd consecutive month of trade surplus.
The November 2023 trade surplus was down 43.1% compared to RM21.8bil in November 2022, and fell by 3.8% from RM12.9bil in October 2023.
A poll by Bloomberg had forecast a trade surplus of RM16.54bil in November 2023.
Chief statistician of Malaysia, Datuk Seri Mohd Uzir Mahidin, remarked that Malaysia’s export performance fell in November 2023 in line with the decline in domestic exports.
Domestic exports worth RM95.9bil, contributing 78.5% to total exports, dropped by 7.4%.
On the other hand, re-exports amounted to RM26.2bil, as it grew marginally 0.1% y-o-y. as compared to November 2022.
“As compared to October 2023, the performance of exports, imports, total trade and trade balance recorded a contraction of 3.2%, 3.1%, 3.1% and 3.8%, respectively.
“From the perspective of the commodity group, 125 out of 257 export groups showed a decline in November 2023, however 146 out of 258 import groups increased as compared to the same month of the previous year,” said Mohd Uzir.
For the January to November 2023 period, Malaysia’s total trade, exports, imports and trade surplus registered a drop.
Total trade fell by 7.5% y-o-y to RM2.4 trillion, in line with the decline in exports (down by 7.8% y-o-y) as well as imports (down by 7.1% y-o-y).
At the same time, the country’s trade surplus for the 11 months decreased by 11.3% to RM202.5bil.
In a note, MIDF Research said the sustained surplus in E&E trade would keep Malaysia’s trade in surplus.
“However, dependency on imports for products such as transport equipment, machinery, chemicals and even agriculture (and food) products would limit the size of surplus from growing further,” it added.
Looking ahead, Bank Muamalat’s Mohd Afzanizam said the cheap ringgit should help “in some ways” to improve Malaysia’s exports competitiveness.
“Our year-end target for US dollar-ringgit in 2024 is at RM4.50 and at this level, we still think that ringgit is undervalued.
“Therefore, the expected recovery in the ringgit versus the US dollar should not disrupt the possible improvement in Malaysian exports next year, which possibly could range around 5% to 6% in 2024,” he said.
SERC’s Lee also said a stronger ringgit will not have a significant impact on the exports as the projected recovery in exports is largely due to the improved demand or volume effect.
However, the exchange rate translation gain will be lower for the export sector.
“It must be noted that other currencies are also likely to appreciate against the US dollar in 2024 on the back of the US interest rate cuts and peaking of the US dollar,” he said.
