Malaysia’s Exports experienced a smaller contraction (-4.4% YoY; Sep: -13.8%), surpassing expectations (KIBB: -9.3%; consensus: -5.0%) as the impact of the high base effect diminished.
Kenanga Research Economic Viewpoint cited today (Nov 21) that on a MoM basis (1.5%; Sep: 8.1%): trade expanded for the second consecutive month but at a slower pace.
Export growth was supported by an improvement in shipments to major trading partners and a rebound in the agriculture sector.
By destination: supported by a rebound in exports to the US (4.0%; Sep: -9.3%) contributing 0.4 ppts (Sep: -1.1 ppts) to overall export growth. Moreover, there was a lesser contraction among major trade partners, led by CN (- 7.0%; Sep: -17.3%), followed by SG (-8.2%; Sep: -12.0%) and JP (-23.4%; Sep: -25.5%).
Notably, the export share to China of the total exports expanded (13.6%; Sep: 13.4%), reaching a three-month high.
Kenanga added that by sector, growth in agriculture exports rebounded into positive territory (3.3%; Sep: -23.1%) for the first time in 13 months, thereby supporting overall growth.
This was also supported by a lower contraction in manufacturing (- 3.5%; Sep: -11.9%) and mining (-21.9%; Sep: -28.5%) sectors.
By product, trade was largely weighed down by the continued weakness in commodity-related exports, particularly LNG (- 34.9%; Sep: -37.8%), petroleum products (-23.7%; Sep: -37.8%), crude petroleum (-37.8%; Sep: -13.9%) and palm oil-based manufactured products (-15.1%; Sep: -20.4%).
Meanwhile, the export of E&E, the largest export product accounting for 47.7% of total exports, contracted at a slower rate (-2.3%; Sep: -5.6%) over the past three months.
Imports, Kenanga cited, fell marginally (-0.2%; Sep: -11.1%), surpassing expectations (KIBB: -9.9%; consensus: -9.3%).
The smaller contraction in import growth was mainly due to a slight rebound in retained imports (0.6%; Sep: -8.0%) and a reduced contraction in re-exports (-2.2%; Sep: -18.3%).
By category, growth was driven by a strong rebound in consumption (9.9%; Sep: -0.5%) and capital (8.6%; Sep: -6.4%) goods, but this was partially offset by a slowdown in intermediate (-7.9%; Sep: -15.2%) goods.
Nevertheless, imports expanded strongly on a MoM basis (13.4%; Sep: 2.1%), the highest since March 2022.
The trade surplus narrowed to a six-month low at RM12.9b (Sep: RM24.4b), lower than expectations (KIBB: RM17.4b; consensus: RM21.7b) as the MoM rebound in imports surpassed exports.
Kenanga said total trade remained weak (-2.4%; Sep: -12.6%), but contraction eased as MoM growth gained 6.8% (Sep: 5.3%).
Their 2023 exports forecast remains at -5.7% (2022: 24.9%) in anticipation of a slight recovery in the final quarter − Year to date (Jan-Oct), exports fell by 8.0%, a slight improvement from the previous period (Jan-Sep: -8.4%).
The weaker export performance was mainly due to the subdued export of commodity-related goods amid lower commodity prices and global trade activity, alongside the effect of the high base recorded last year.
While Kenanga expects the export contraction to continue through the end of the year, they see this extent of the slowdown to ease as the impact of the high base effect diminishes.
In 2024, Kenanga expects a strong rebound, with exports projected to grow by 9.4%.
Considering the better-than-expected GDP growth in 3Q23 (3.3%; 2Q23: 2.9%) and the anticipation of a gradual easing in export contraction, Kenanga expects GDP growth to remain robust at 3.7% in 4Q23, bringing the full-year growth to settle near the upper end of their forecast range of 3.5% – 4.0% (2022: 8.7%).
Moving forward, the recovery in the external sector is expected to extend in 2024, subsequently supporting GDP growth to expand to our forecast of 4.9% in 2024.
