The latest trade performance report released by the Ministry of International Trade and Investment pointed to Malaysia’s external trade being still robust in October, although from an annual growth perspective it was relatively slower than in previous months noted MIDF.
Growth in total trade was more moderate at +21.1%yoy, the slowest pace in eight months. Exports grew further at +15%yoy, maintaining double-digit growth for the 15th consecutive month. Although the pace of growth was lower than market consensus’ estimate of +24.7%yoy, the moderation was as expected given the higher base in October 2021. On another note, growth in re-exports remained relatively stronger at +31.6%yoy (Sep-22:+46.4%yoy) vis-à-vis domestic export growth which moderated to +10.8%yoy (Sep-22: +25.8%yoy).
Similarly, import growth slowed to +29.2%yoy in Sep-22, slightly lower than the market consensus +30.8%yoy. Nevertheless, the continued double-digit import growth since Feb-21 suggests the positive effect of economic reopening and growing domestic economic activities.
Excluding re-exports, retained imports rose by +28.3%yoy, higher than the previous month. Moderation in total imports could be due to softening inbound shipments of intermediate and consumption goods. However, the pace of both imports remained strong reflecting upbeat domestic industrial activities and robust local demand. Capital goods imports, on the other hand, strengthened to +42.1%%yoy, the fastest pace since May 2021. The research believes the upsurge in capital goods imports could be attributed to purchases of airplanes, oil & gas machinery, and industrial equipment. This was in tandem with the effects of international borders reopening, the benefits of elevated commodity prices, and the easing in global supply chain constraints.
In view of the data, MIDF has kept its exports and imports forecasts at +26% and +30.5%, respectively. It maintains the projection for exports and imports to grow at +26% and +30.5%. Based on the latest data, external demand remained robust despite concerns over slowing global growth. MIDF expects more moderate growth rates for both exports and imports in the final few months of 2022 as the low-base effect diminishes. Thus far, exports and imports rose by +28.5%yoy and +35.4%yoy. Trade sector stands to benefit from elevated commodity prices, growing external demand for E&E and commodities (i.e. petroleum and palm oil), and continued rise in global production and international trade activities. Imports would expand further on the back of growing domestic demand, and increased business activities and consumer spending. Nevertheless, it opines there are several risks to near-term trade outlook, mostly from external uncertainties such as deterioration in the global growth outlook, weaker final demand (as a result of rising inflation and borrowing costs), and escalation of geo-political tensions.
