Malaysian exports rebounded (Jan 2024: +8.7% YoY; Dec 2023: -10.1% YoY) and imports surged (Jan 2024: +18.8% YoY; Dec 2023: +2.9% YoY) in Jan 24 amid narrower trade surplus (Jan 2024: +RM10.1b; Dec 2023: +RM11.7b).
Granted that the robust external trade growth last month could be due to shipments ahead of Lunar New Year holidays in Feb 2024, the positive start to 2024 augurs well for the expected rebound in external trade to support the outlook of firmer economic growth this year.
Exports & imports up on non-E&E shipments, domestic & intermediate demands
Chief Economist of Maybank Investment Bank Berhad (Maybank IB) Suhaimi Ilias said the exports rebound in Jan 24 – that halted 10 straight months of declines – was driven by turnarounds in Manufacturing (Jan 2024: +9.3% YoY; Dec 2023: -10.4% YoY) and Agriculture (Jan 2024: +17.5% YoY; Dec 2023: -25.9% YoY) amid reversal in Mining (Jan 2024: -4.9% YoY; Dec 2023: +9.0% YoY).
Manufacturing exports gained on higher non-E&E shipments, namely Petroleum Products (Jan 2024: +24.2% YoY; Dec 2023: -22.2% YoY), Machinery, Equipment & Parts (Jan 2024: +35.7% YoY; Dec 2023: -0.1% YoY), Malaysia
Iron & Steel Products (Jan 2024: +70.4% YoY; Dec 2023: +14.5% YoY), Manufactured Metal Goods (Jan 2024: +31.3% YoY; Dec 2023: -7.1% YoY) and Optical & Scientific Equipment (Jan 2024: +21.8% YoY; Dec 2023: -7.9% YoY). E&E exports fell further but by less (Jan 2024: -6.5% YoY; Dec 2023: -12.1% YoY).
Agriculture exports rose on rebound in palm oil exports (Jan 2024: +25.7% YoY; Dec 2023: -27.2% YoY) as export volume recovered (Jan 2024: +49.8% YoY; Dec 2023: -34.1% YoY) amid lower export price (Jan 2024: -16.1% YoY; Dec 2023: -34.1% YoY).
Mining exports dropped as LNG exports fell (Jan 2024: -9.3% YoY; Dec 2023: -0.1% YoY) reflecting export price decline (Jan 2024: -11.2% YoY; Dec 2023: -12.0% YoY) as export volume moderated (Jan 2024: +2.1% YoY; Dec 2023: +13.6% YoY). Meanwhile, crude petroleum exports remained firm (Jan 2024: +17.7% YoY; Dec 2023: +35.1% YoY), supported by export volume growth (Jan 2024: +18.3% YoY; Dec 2023: +37.4% YoY) amid lower export price (Jan 2024: -0.5% YoY; Dec 2023: -1.6% YoY).
Surge in imports – and third consecutive month of growth – were supported by both domestic and intermediate demands as per the rise in imports of capital goods (Jan 2024: +41.8% YoY; Dec 2023: +23.7% YoY), consumption goods (Jan 2024: +25.4% YoY; Dec 2023: -0.7% YoY) and intermediate goods (Jan 2024: +21.4% YoY; Dec 2023: +10.2% YoY) plus rebound in imports for re-exports (Jan 2024: +4.1% YoY; Dec 2023: -20.3% YoY).
Positive start augurs well for 2024 outlook
Jan 2024 external trade figures may have been boosted by shipments ahead of the Lunar New Year that fell on 10 Feb 2024 that comes with extended shutdowns domestically and regionally (e.g. 10-day holidays in China; week-long holidays in Vietnam) on an already short month (notwithstanding the leap year).
The calendar effect can be expected to show up in Feb 2024 number, so the key is to see how the 2M 2024 compares with 2M 2023 plus post-Feb 2024 monthly trends. But external trade’s positive start to 2024 augurs well for the expected rebound in external trade this year to support the outlook of firmer 2024 economic growth of +4.4% (2023: +3.7%).
“For this year, we currently forecast exports and imports to rebound by +4.7% and +5.6% respectively. A major driver for the projected exports rebound this year is the projected turnaround in electronics cycle as WSTS expects global semiconductor sales to rebound by +13.1% in 2024 (2023: -8.2%),” he added.
Meanwhile, CGSCIMB in its Economics Note today (Feb 21) said Malaysia’s exports growth rebounded 8.7% yoy in Jan 24, the first positive growth since Feb 23 while imports rose 18.8% yoy in Jan 24.
Exports of manufactured goods rose for the first time since May 23. It rose 9.3% yoy, mirroring improvement in PMI manufacturing data in Jan 24. Exports growth is expected to stay positive in 2024 aided by uptick in E&E shipments, muted El Nino impact, and limited impact from the Red Sea Crisis.
Manufacturing and agriculture contributed to the rise of exports Malaysia’s exports growth rebounded 8.7% yoy in Jan 24, the first positive growth since Feb 23, beating CGSCIMB’s estimate of 4% and Bloomberg consensus’ expectations of 3%.
Exports of manufactured goods rose 9.3% yoy in Jan 24 after 7 months of contraction (Dec 23: -10.4% yoy), boosted by higher shipments of petroleum products as well as optical and scientific equipment.
Similarly, exports of agriculture products increased by 17.5% yoy in Jan 24 vs. -25.9% yoy in Dec 23, amid higher shipments of natural rubber (+17.1% yoy) and palm oil (+25.7% yoy).
Robust imports signal steady domestic demand Imports posted double-digit growth of 18.8% yoy in Jan 24 (Dec 23: 2.9% yoy), boosted by capital, consumption, and intermediate goods components.
Demand for consumption goods rose 25.4% yoy in Jan 24 (Dec 23: -0.7% yoy), its strongest growth since Sep 22, due to higher imports of processed food and beverages mainly for household consumption. In our opinion, this partially mirrored the recent increase in private consumption, with 4Q23 data suggesting a greater gain of 4.9% yoy vs. 4.8% in 3Q23.
This could mark a good start for 1Q24 private consumption performance notwithstanding the unfavourable global economy and downward pressure from interest rate normalisation.
However, CGSCIMB is cautious on the potential government reforms, primarily the rationalisation of subsidies which could impact domestic demand. E&E recovery could generate further optimism in export growth Exports growth is likely to remain in positive territory throughout 2024 due to these factors:
Shipments of electrical & electronics (E&E) to continue to improve further in the coming months following an encouraging double-digit growth in global semiconductor sales in Dec 23
For agriculture sector, CGSCIMB believes the El Niño impact on domestic plantations is somewhat muted. This, alongside favourable labour conditions may continue to support the sector’s growth.
After the then Malaysian Minister of Plantation and Commodities Dato’ Fadillah Yusof visited China in Nov 23, he pledged to raise Malaysia’s palm oil exports to China to 3.4m tonnes in 2024 (2023F: 3.14m tonnes). China was Malaysia’s second-largest palm oil export market in 2023.
CGSCIMB highlighted the risk from the Red Sea crisis as Malaysia’s export volume fell in Dec 23. However, the encouraging Jan 24 trade data seems to have negated this concern, for the time being. That said, delays in shipments may still be a lingering issue despite limited impact on trade volume.
CGSCIMB’s concerns include the possible revival of a US-China trade war if the US sees a change in political administration after the presidential election in Nov 24.
Lower trade surplus marks a poor start in 1Q24F Malaysia recorded a lower trade surplus of RM10.1bn in Jan 24 (vs: RM11.7 in Dec 23), marking a poor start in 1Q24F.
This is the lowest trade surplus recorded since May 2020 and CGSCIMB thinks that the current account might be supported by a recovery in the services account after foreign visitor arrivals breached Ministry of Tourism target of 19.1m arrivals in 2023.
CGSCIMB expects foreign visitor arrivals to continue at this pace in 2024 and maintain their current account forecast at 2.2% of GDP in 2024F (2025F: 2.5% of GDP).
