Malaysia’s February exports growth fell slightly, by -0.8% yoy, while imports continued to grow, at 8.4% yoy but outlook still remains positive
Feb’s exports to the US (which accounts for 10% of Malaysia’s total trade) increased by 10.1% yoy, signalling better recovery ahead. Current account will be supported by goods and services account, where CSG International (CGS) anticipates sizeable trade surplus for the year on an increase in tourist arrivals.
Slower trade activity in Feb amid fewer working days
Malaysia’s Feb exports growth fell slightly by -0.8% yoy, lower than CGS’s and Bloomberg consensus’ expectations. On a mom basis, both exports and imports contracted by 9.1% and 10.5% in value, respectively, attributed to fewer working days in the month.
Exports of manufactured goods fell by -2.4% yoy in Feb (vs. Jan’s +9.3% yoy), dragged by slow shipments of electrical and electronics (E&E) products, petroleum products, as well as chemicals and chemical product, CGS said, in its Economics Note today (Mar 19).
Meanwhile, exports of mining products rebounded by 16.8% yoy in Feb (vs. Jan’s -4.9% yoy), supported by higher shipments of LNG, crude petroleum, and petroleum condensates. Imports of intermediate goods, which are used as indicators of export performance going forward, rose by 8.4% yoy in Feb, marking the fourth consecutive month of expansion.
Improved exports with main partners signal some recovery ahead
By destination, Feb’s exports to the US was aided by strong shipments of E&E products, machinery, equipment and parts, as well as optical & scientific equipment, signalling a recovery ahead, in CGS’s view.
Meanwhile for China, on a mom basis, exports rose by 3.1% in Feb, while recording a lower contraction of -0.4% yoy (Jan: -7.4% yoy).
Shipments to increase with improved supply chain
Despite slower growth recorded for the month, exports and imports improved for the period Jan-Feb at 3.9% yoy and 13.6%, respectively, vs. the similar period in 2023.
Manufactured goods shipment also recorded positive growth of 3.4% yoy on a cumulative basis; CGS thinks this a good start for 2024F in supporting trade growth.
CGS projects shipments to increase ahead following Jan’s trade volume showing improvements vs. Dec 23 (Feb 24 numbers yet to be released) indicating Red Sea crisis having a smaller impact than anticipated.
According to S&P Purchasing Managers Index (PMI) Manufacturing report, Malaysian manufacturers’ output demand and new orders have been increasing, although at a marginal rate.
The Indo-Pacific Economic Framework (IPEF) for Prosperity agreement on supply chains came into effect last month for its 14 member countries.
CGS thinks the IPEF agreement will provide stronger supply chain support ahead. However, potential risk of trade disruption could be exacerbated due to geopolitical tensions in the Red Sea region, as well as potential trade disputes globally with a change in political administration after the US presidential elections in Nov 24.
CGS maintains their 2024F current account at 2.2% of GDP
CGS thinks the overall outlook for Malaysia’s 2024F trade balance remains positive in the near term. Malaysia’s Feb trade surplus of RM10.9bn was higher than Jan’s RM10.2bn, following a larger decline in import value.
On a cumulative basis, the trade surplus remains sizeable at RM21bn in 2M24, vs. RM37.7bn 2M23.
CGS views a recovery in the services account, following an increase in foreign tourist arrivals, as supportive of the current account.
In 2024, Malaysia aims to welcome 27.3m foreign visitors (2023: 20m), surpassing the 26.1m tourist arrivals in 2019 prior to the Covid-19 pandemic, with tourism-related income expected to exceed RM102.7bn.
CGS believes this will be a positive support for Malaysia’s current account towards their forecasted 2.2% of GDP for 2024F (2023: 1.2%).
