Malaysia’s exports declined for the ninth straight month in November, while contraction was smaller than what most economic analysts forecast but it was slightly above consensus estimate. Month on month figures dropped to a four-month low after two consecutive months of expansion.
This was due to lower shipments to major trading partners and weaker exports of key sectors and products dampened overall export growth. By destination: exports to major destinations remained subdued, with Japan leading, followed by Singapore, the US and China. By sector: broad-based slowdown led by manufacturing and agriculture sectors. This was also due to a sharp moderation in the mining sector. By product: weighed down by further downtrend in electrical and electronics (E&E) exports, the largest export product accounting for 44.4% of total exports, as well as continued weakness in commodity-related exports, especially LNG (-14.8%; Oct: -34.9%) and palm oil-based manufactured products.
Imports rebounded, charting positive growth for the first time since February 2023, surpassing expectations due to a lower base effect recorded last year. Positive import growth was driven by higher retained imports and a marginal rebound in re-exports.
Kenanga noted that trade surplus also narrowed to a 42-month low at RM12.4b (Oct: RM12.9b), below consensus (RM16.5b) but it did beat the house’s forecast as the MoM contraction in exports outpaced imports.
2023 exports likely to settle below forecast of -5.7%, with growth potentially rebounding in 2024 on the back of the gradual global recovery
Year to date (Jan-Nov), exports fell by 7.8%, mainly due to subdued export of E&E goods and commodity-related goods amid lower commodity prices and global trade activity, alongside the effect of the high base recorded last year. Kenanga expects the export contraction to ease in the near term as the impact of the high base effect diminishes.
Despite escalating geopolitical tensions in the Middle East which could disrupt the global supply chain, it maintains a cautious outlook for 2024. Nevertheless, the house said it continues to forecast a 9.4% rebound in exports for 2024, assuming there are no unforeseen shocks to the global economy.
Kenanga has also expects GDP growth to remain robust in the near term, expanding by 3.7% in the final quarter (3Q23:
3.3%), bringing the full-year growth to settle near the upper end of its forecast range of 3.5% – 4.0% (2022: 8.7%). As it expects the recovery in the external sector to pick up pace in the next six to 12 months, alongside steady and resilient domestic demand, and projects GDP growth to expand further to 4.9% in 2024.
