Based on MATRADE’s latest trade figures, Malaysia’s export growth accelerated in August (48.2% YoY; Jul: 38.0%) to a 16-month high, beating expectations as export rebounded to a two-month high, following a sharp contraction in the preceding month. Higher growth was largely due to the low base effect recorded last year and continued recovery in the external demand which partially offset the adverse effect of rising geopolitical tensions, ongoing China’s zero-COVID policy, and the Russia-Ukraine crisis.
Exports remained supported by sustained demand from key trading partners and expansion in the manufacturing sector. Broad-based expansion among key trading partners was led by Singapore, followed by Japan, the US, EU, and China. Based on the sector the growth came from manufacturing, which expanded for the fourth straight month followed by agriculture. This partially capped the sharp slowdown in the mining sector. It also rebounded on MoM-basis by 6.4%.
Imports however surged to 67.6% in August far beating expectations, higher growth was due to sharp expansion in retained imports and re-exports. This is also indicative of a sustained domestic-driven growth trend in the 3Q22. By category, higher import growth was attributable to an expansion in intermediate goods and consumption goods which partially offset a moderation in capital goods. On a month-on-month basis, imports rebounded, trade surplus expanded to RM16.9b, beating expectations as exports outpaced imports. Overall, total trade expanded at the fastest pace since February 1998.
As such Kenanga revised its exports forecast up to 27.0% from the previous forecast of 19.1% as the total export value
likely to cross the RM1.5 trillion mark. Despite the risk of looming global recession, ongoing China’s zero-COVID policy, and Russia-Ukraine conflicts, Malaysian trade performance remained relatively robust with exports expanding by 30.3% year-to-date. The better performance was primarily associated with Malaysia’s export diversification, elevated commodity prices, and partly weak ringgit which benefited exporters. Ringgit recently hit a historic monthly low against the USD at 4.46.
Despite the stellar trade figures, Kenanga actually retains its cautious outlook amid an expected global economic slowdown brought by the acceleration in global monetary policy tightening to combat elevated inflation. The analysts maintain their GDP growth forecast at 5.5% – 6.0%.
