Malaysia’s Trade And Current Account Surplus Remain Supported: OCBC

The Ministry of International Trade and Investment released April’s trade data showing a 12% increase with export rebounding after two months of contraction.

However diving deeper into the statistics, OCBC Bank in its analysis said although export and import growth improved in April, it fell short of expectations, as the 9.1% YoY export growth was below the 14.1% expectations while import growth which picked to 15.6% versus 12.5% in March was also below expectations of 17.8%; OCBC: 16.6%).

While the trade surplus narrowed more-than-expected to MYR7.7bn in April from MYR12.7bn in March (Consensus was MYR11.8bn; OCBC: MYR12.1bn).

The improvements in export growth to 9.1% YoY versus -0.9% in March were due to some favourable base effects. On a seasonally adjusted sequential basis, export growth dropped to -7.0% MoM in April, according to the Department of Statistics.

Nevertheless, improvements were recorded in YoY terms for all major categories of exports including chemicals (22.3% YoY versus -3.8% in March), LNG (12.7% versus 8.4%), machinery and appliances (35.7% YoY versus 12.0% in March). Encouragingly, electrical and electronics exports grew by 0.6% YoY versus -1.7% in March, first positive growth in eight months. By destination, exports to ASEAN, Mainland China and HK SAR, USA, EU and Taiwan picked up in April 2024 versus March. Exports to Japan, however, remained weak.

Meanwhile, the pickup in import growth to 15.6% YoY was supported by strong growth in intermediate goods (+30.5%), consumption goods (+19.5%) and capital goods (+9.7%) imports. This suggests that domestic demand remained resilient in April and will continue to be a key driver of growth this year.

Looking ahead,  OCBC says there is likely to be some normalisation in export growth in YoY terms as favourable base effects fade. Notwithstanding, the house expect there to be a trend improvement in export growth supported by electronics and electrical exports in 2H24 as global electronics demand improves, in line with its views. The trade and current account surpluses should remain supported. OCBC maintains its 2024 current account surplus forecast of 2.5% of GDP.

OCBC says resilient growth prospects and solid external balances amid benign inflationary pressures will allow Bank Negara Malaysia to keep its policy rate unchanged in 2024. The key risk to forecasts is from the timing and mechanism regarding the introduction of targeted fuel subsidies.

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