PETALING JAYA: The country’s exports to all its major markets declined in December last year.
However, economists expect trade activity to gradually recover in the coming months following a rebound in the global tech cycle and due to the low-base effect.
In December, exports reverted to a double-digit decline of 10% year-on-year (y-o-y), doubling Bloomberg consensus 5% fall and coming in steeper than UOB’s estimate of minus 4.5%.
The Singapore-based bank noted that for the full year of 2023, exports plunged the most since 2009 by 8% (2022: plus 24.9%), which was worse than its projection of 7.2%.
“However, this low base is expected to be a plus point for 2024’s export growth outlook.
“There are also signs of further recovery in regional trade amid an expected upturn in the global tech cycle, continued stabilisation in China’s economy, a soft landing for the world economy and gradual monetary policy easing by central banks,” UOB said in a report yesterday.
For 2024, the banks’ economists maintain the view that the nation’s exports will turn around and grow moderately by 3.5% (Finance Ministry estimate: plus 5.1%) after contracting by 8% in 2023.
“World Semiconductor Trade Statistics projects a persistent and robust rebound in global semiconductor sales to plus 13.1% in 2024 (from an estimated minus 9.4% in 2023 and plus 3.3% in 2022). “This will bode well for significant electrical and electronics (E&E) exporting countries including Malaysia as overseas shipments of E&E products made up slightly over 40% of Malaysia’s total gross exports of goods.”
While there are catalysts, the downside risks to export recovery have also risen, particularly from geopolitical tensions, said UOB.
“Of great concern to us will be the Red Sea Crisis and US-China tech conflicts as the United States is among major economies that will hold elections this year. If the Red Sea Crisis escalates and prolongs, it will result in global supply chain disruptions, slow trade flows as well as higher input and business operating costs.”
Meanwhile, TA Research forecasts exports to register nominal growth of 4.8% in 2024 backed by a resurgence in China’s economy where indications are that the country is poised to achieve a growth rate surpassing 5.2% this year.
The research firm said despite the weak trade readings, Malaysia’s trade performance in 2023 surpassed the RM2 trillion mark for the third consecutive year and has maintained a surplus for 26 successive years since 1998.
“Exports achieved a remarkable feat by exceeding RM1 trillion for the third consecutive year, reaching 82.4% of the target set for 2025 under the Mid-Term Review of the Twelfth Malaysia Plan.
“Simultaneously, imports reached another milestone by crossing the RM1 trillion mark for the second time,” said TA Research.
