The country’s latest trade report released by MITI indicated that export growth moderated sharply to a 27-month low in January, lower than expectations − MoM (-14.4%; Dec 22: 1.6%): fell sharply, lowest since April 2020, reflecting a slower growth momentum amid subdued demand and the impact of the shorter working period due to the Lunar New Year holidays.
Growth slowed due to a subdued demand among major trading partners, and weak shipment in the key export sector − By destination: subdued demand led by China (- 11.9%; Dec 22: -12.1%), followed by the US, and the EU. − By sector: attributable to a slowdown in agriculture (-19.8%; Dec 22: -0.4%) and manufacturing, but partially offset by an expansion in mining.
Imports moderated sharply to 2.3%, a 23-month low and lower than expectations as retained imports plunged to the lowest since November 2020 − By category, the slower import growth was mainly weighed by a broad-based slowdown led by consumption goods, followed by intermediate goods and capital goods. On a MoM basis, imports plunged for the third straight month.
Trade surplus narrowed to RM18.2b in January, lower than expectations as MoM fall in exports, far outpaced imports. − Meanwhile, total trade moderated to 1.9%, a 26-month low or the lowest growth since November 2020, reflecting a slowdown in trade activity at the start of 2023.
Although January’s export may reflect seasonal factors due to the festive season period and a shorter working day, Kenanga still expect growth to moderate in the coming months amid the normalisation of economic activities and the diminishing effect of the lower base recorded last year.
Nevertheless, following better-than-expected GDP growth in 4Q22 and overall 2022, Kenanga has revised the GDP forecast for 2023 to 4.7% (2022: 8.7%) from 4.3% as growth is expected to be supported by resilient domestic demand and considering the positive effect of China’s economic reopening as well as the increase in tourist arrival and domestic spending. However, Kenanga said it remains cautious about the growth outlook as slack in the external sector could weigh on domestic growth going forward.
