Malaysia’s External Trade: 2021 Review And This Years Forecast

Malaysia’s exports grew strongly in 2021 despite disruptions recent data showed that the oversea sales of goods sustained strong growth of +29.2%yoy in Dec-21, the fifth straight month of double-digit growth. Domestic exports were up by +34.3% while re-exports increased by +23.9%. With the gradual reopening of the domestic economy amid the progressive vaccination rate, imports rose by +23.6% in Dec-21, sustaining two-digit growth since Feb-21.

Exports and imports rebounded by +26% and +23.3%. The strong pick-up in the external trade performances among others fueled by a robust recovery in global demand and elevated commodity prices. Exports’ share of GDP is more than a decade high. As for the GDP ratio, exports’ contribution to the economy surged to a 13-year high at 81.9% in 2021. Similarly, the ratio of imports rose to 65.2%. Net exports which contribute significantly to the GDP hit +16.7% in 2021, the highest point since 2009. MIDF in its review believes the diversification of products in Malaysia’s external trade aid the recovery momentum especially the sales of E&E, rubber gloves, pharmaceuticals, and commodity-based products. Looking into exports, domestic exports continue to dominate total exports at 81.5% while re-exports at 18.5% in 2021.

Overall, Malaysia’s exports performed relatively better than other regional peers. Measured in USD terms, exports registered relatively stronger growth of +27.7% (vs. +26% in ringgit) last year. The stronger growth in USD terms reflected the strengthening of the ringgit last year, exchanging at RM4.14 per dollar on average or +1.4% stronger than the previous year (2020: USD4.20). Performance was commendable despite the imposition of a full lockdown. Although regional countries like Thailand, Vietnam, and even Singapore also tightened Covid-19 restrictions last year, the growth in exports was not as high as Malaysia. Again, we attribute this to the diversified export products as Malaysia benefited from global demand for E&E and resource-based products, especially palm oil, refined petroleum, and LNG. Not to forget, high commodity prices also underpinned the country’s strong trade performance last year.

Following the commendable rebound in both exports and imports, Malaysia’s total trade reached a new record high of RM2.2 trillion, an increase of +24.8% from 2020. Accordingly, the research house estimates that the robust expansion pushed the total trade-to-GDP ratio higher to 147% (2020: 126% of GDP). As a highly open economy, Malaysia’s economy continued to benefit from the sustained growth in global trade activity last year

For this year, MIDF has forecast exports and imports to grow at +4.5% and +5.1% in 2022 adding that external trade will continue to benefit from the post-pandemic recovery of the global economy. The house also projects export growth at +4.5% this year given the encouraging outlook of external demand for E&E, and commodity export products such as palm oil, LNG, and petroleum. However, cautioning the pace of growth will continue to be influenced by the change in the Covid-19 situation, the slowdown in China, and prolonged disruptions in the global supply chain. Meanwhile, imports are expected to grow at +5.1% in 2022, driven by the recovery in domestic spending and investment activities.

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