MIDF FORECASTS EXPORT TO GROW 5.2%, IMPORT 4.4% IN 2024

Malaysia's total trade declined sharper at -4.3%yoy in Dec-23, falling the 9th consecutive month, MIDF notes the decline mainly reflected the continued fall in exports vis-à-vis rising imports, which expanded for the second month. The weak exports together with growing imports resulted in reduced trade surplus of RM11.8b, the smallest surplus since Jun-20.

Exports fell sharper by -10%yoy, extending the year-on-year contraction for the 10th straight month. The sharper fall was against ours and market expectations for smaller decline as exports for several regional countries improved in the final 2 months of 2023. The weaker exports was mainly due to sharper fall in re-exports, in contrast to relatively slower fall in domestic exports. On month-onmonth basis, exports decreased by -2.7%mom, largely due to lower exports of petroleum products and crude petroleum far offset the increases in exports of E&E products and LNG.

For the full-year 2023, the decline in exports by -8.0%yoy was larger than the estimate, taking into account the sharper fall in Dec-23. Nevertheless, the house still expects recovery in external demand will support better exports performance going forward in view of better regional trade performance.

MIDF said although exports sequentially rose by +2.8%qoq from 3QCY23, the higher growth in imports by +10.8%qoq resulted to smaller trade surplus of +RM36.9b in the final quarter 2023. This will result in a continued drag from net exports (of goods) to the GDP growth in 4QCY23 as the size of trade surplus during the quarter was far lower than +RM68.2b in 4QCY22.

For the whole year 2023, with exports declining by -8% and imports only falling by -6.4%, trade surplus decreased by -16.4% to +RM214.1b last year, the lowest trade surplus in 3 years. Given the sharper fall in exports and smaller trade surplus, external trade will be the reason behind more moderate GDP growth for Malaysia in 2023.

However, in view of improving E&E exports and better export performance reported by several regional countries, the house expects to maintain its projections that external trade will recover this year. MIDF forecasts goods exports and imports to rebound in 2024 and grow at +5.2% (2023: -8%) and +4.4% (2023: -6.4%).

Apart from the turnaround in the global E&E market, the house expects continued (albeit moderate) economic growth in China and the US will support export growth this year. Nevertheless, MIDF opines several downside risks could affect global trade this year such as increased geopolitical and trade tensions, sharper slowdown in major economies and still sluggish global manufacturing activities.