Ferlito said the fact that imports are growing at a quicker rate comparatively should not be overlooked.
PETALING JAYA: Economists are shading their optimism with a sense of prudence over the outlook for Malaysia’s external trade although August numbers again showed the country’s international transactions continue to grow.
Numbers released by the Statistics Department revealed that total trade has increased 18.6% year-on-year (y-o-y) from RM213bil a year ago to RM252.7bil last month, but with the primary driver being a 26.2% y-o-y growth in imports to RM123.5bil.
Exports, meanwhile, expanded by by 12.1% y-o-y to RM129.2bil in August.
Economists said it is important to track the quick rise of imports to maintain a healthy trade surplus which decreased by 67.3% y-o-y to RM5.7bil.
Economist and chief executive at Centre for Market Education Carmelo Ferlito said while it is heartening to see the persistent improvement of Malaysia’s external trade, the fact that imports are growing at a quicker rate comparatively should not be overlooked.
“Although this is the 52nd consecutive month of trade surplus since May 2020, we see that it is continuing to shrink.
“Even the very good performance with the United States, which saw Malaysian exports stateside increasing by 45.4% y-o-y, is offset by imports increasing at a much quicker pace, evidenced by our trade with China which has seen imports growing by more than five times exports,” he observed.
He pointed out that Malaysia’s external trade appeared to involve a higher number of trading partners, which would serve to reduce the country’s reliance on major external trade heavyweights such as China, the United States and Singapore.
Ferlito said while external trade has continued to grow, domestic demand will continue to lead the expansion of the country’s gross domestic product or GDP.
“Good signals from international trade are a sign of confidence that is very much needed and hopefully sentiment will keep on improving. We have to remain attentive to the evolution of the international scenario,” he said.
According to chief statistician Datuk Seri Dr Mohd Uzir Mahidin, the rise in total exports was in line due to the increase in the exports of electrical and electronics (E&E), which saw a y-o-y growth of RM7.1bil in August.
This far outstripped the next contributor, which is the manufacturing of other products, that saw a rise of RM2.3bil y-o-y.
On the E&E industry, Kenanga Research, in a report to clients, yesterday forecast the global semiconductor market to experience robust growth this year and in 2025.
It said as of July, global semiconductor sales surged by 18.7% y-o-y, reaching US$51.3bil, and the impressive growth has been driven by strong demand in the Americas, China and Asia-Pacific, although Japan and Europe saw slight declines.
Looking forward and quoting the World Semiconductor Trade Statistics, the research firm is expecting the global semiconductor market to grow by 16% in 2024, with logic and memory leading the charge, with a 12.5% growth being projected for 2025, reaching US$687bil.
It added: “Malaysia’s data centre sector is expected to expand significantly, with information technology capacity increasing from 500MW to over 3,000MW.
“Artificial intelligence (AI) servers alone are estimated at RM97.8bil, offering significant opportunities for local tech players. Following a 12 to 18-month data centre construction phase, we anticipate the fit-out phase to begin in the fourth quarter of this year to the first half of 2025.”
Meanwhile, Mohd Uzir said the upsurge in imports of end-use products was in accordance with higher demand for intermediate goods, capital goods and consumption goods.
He said imports of intermediate goods, which made up 58.5% of total imports and valued at RM72.3bil, registered an increase of 40.4% compared with August last year.
At the same time, he said capital goods, making up 12.1% of total imports with a value of RM14.9bil, also rose by 39.6% y-o-y, as consumption goods grew by 21.2% from RM8.5bil in the previous year to RM10.3bil last month.
Chief economist at Bank Muamalat Malaysia Bhd Mohd Afzanizam Abdul Rashid said Malaysia would gain from the improvement in global demand for semiconductors given these products make up a sizeable share in Malaysia’s exports.
He said in light of the proliferation of AI, the Internet of Things and cloud computing, the demand for integrated circuits is expected to grow.
“The consumption of semiconductor related products has gone beyond the traditional markets such as smart phones and computers to other industries such as automotive and agriculture that have been using smart devices which effectively will consume a significant amount of semiconductor products,” he told StarBiz.
A recent report by the Institute of Strategic Analysis and Policy Research noted the shrinking trade surplus may serve as an opportunity for Malaysia to rethink its approach and strengthen its position in the global economy.
The author, senior researcher Dr Mohd Khairul Ramli, said the recent decline in Malaysia’s trade surplus is not merely a short-term anomaly but rather a symptom of deeper structural shifts within the global and domestic economies.
“One of the key factors contributing to the narrowing surplus is the intensifying competition from regional players, particularly within Asean.
“Countries like Vietnam and Thailand have aggressively expanded their manufacturing bases, attracting foreign direct investment that might have otherwise flowed into Malaysia,” he said.
Moreover, he said Malaysia’s economic strategy in recent years had emphasised diversification away from traditional export sectors towards higher-value-added industries.
While this is a sound long-term strategy, Mohd Khairul said it required substantial upfront investments in technology and infrastructure, as evidenced by the increased imports of capital goods.
“These investments, while necessary, have yet to translate into significant export gains, thereby straining the trade balance in the short term,” he added.
