[KUALA LUMPUR] Malaysia’s exports grew 8.7 per cent year on year (yoy) in January to RM122.4 billion (S$34.5 billion), driven by higher shipments of petroleum products, said the Department of Statistics Malaysia on Tuesday (Feb 20).

The growth came in higher than the 3 per cent projected by 17 economists in a recent Reuters poll.

The final figure also reversed Malaysia’s exports downtrend, which started in March last year. In December, the country’s exports shrank 10 per cent yoy.

Sluggish export performance dragged down Malaysia’s economic growth in 2023. The country’s gross domestic product grew at a slower pace of 3.7 per cent last year, falling short of the central bank’s 4 per cent forecast.

Imports in January rose 18.8 per cent from a year earlier, higher than 8 per cent forecast by economists in the Reuters survey.

Overall, the country’s total trade increased 13.3 per cent to RM234.7 billion in January. Trade balance booked a surplus of RM10.1 billion, but this was 44.2 per cent lower than RM18.1 billion in the same month a year earlier.

A NEWSLETTER FOR YOU

Friday, 8.30 am

Asean Business

Business insights centering on South-east Asia's fast-growing economies.

Sign Up

Economists anticipate that Malaysia’s exports will continue their growth momentum, supported by a further uptick in the tech cycle and continuous demand from Asean countries as well as the US and China.

BMI, a unit of Fitch Solutions, expects the recovery in Malaysia’s exports to be gradual due to tepid global demand.

Prolonged weakness in China’s economy will also have an impact, it added.

“The weak outlook for China, where we expect growth to slow to 4.7 per cent in 2024, will also constrain external demand for Malaysia’s exports.”

MIDF Research viewed the stronger-than-expected rebound in exports to be an encouraging development as it expects this will give a boost to the country’s economic growth, which is mainly supported by domestic demand.

“Nevertheless, worsening of geopolitical and trade tensions, lower demand from major trade partners and prolonged weakness in the global production activities are the downside risks of trade outlook,” it added.

BMI expects Malaysia’s exports to grow by 5 per cent in 2024, while MIDF forecasts an expansion of 5.2 per cent.

In January, exports of manufactured goods – contributing 84.7 per cent of the total exports – increased 9.3 per cent yoy. This was driven by higher demand for petroleum products, machinery, equipment and parts, as well as iron and steel products.

Shipments of agriculture products, which account for 6.7 per cent of total exports, rose 17.5 per cent from a year earlier. Exports of mining products, which form 7.9 per cent of total exports, slid 4.9 per cent.

Exports to Singapore – the biggest destination market for Malaysia – fell 2.6 per cent yoy to RM17.4 billion, due to lower exports of electronic and petroleum products.

Exports to China – contributing 11 per cent of total exports – declined 7.4 per cent to RM13.9 billion. This came on the back of lower exports of electronics products as well as metalliferous ores and metal scrap.

Imports of capital and consumption goods increased 41.8 per cent and 25.4 per cent, respectively. Imports of intermediate goods rose 21.4 per cent.

Imports from China – forming 22.9 per cent of total imports – increased 16.7 per cent to RM22 billion. This was driven by higher orders for electronic products as well as machinery, equipment and parts.

Imports from Singapore – accounting for 12.4 per cent of total imports – surged 65.6 per cent to RM14 billion, on higher demand for electronics, petroleum and chemical products.

OCBC senior Asean economist Lavanya Venkateswaran said the “strong start” to January trade data bodes well for the bank’s view that export growth will improve in 2024, notwithstanding monthly fluctuations.

“We expect support to export growth from the bottoming out of the global electronics export downcycle in H2 2024. Importantly, the strong import growth underscores resilient domestic demand conditions for investment and consumption spending,” she said.

She added that OCBC maintains its 2024 GDP forecast for Malaysia at 4.2 per cent.

“From a monetary policy standpoint, we expect Bank Negara Malaysia to keep its policy rate unchanged at 3 per cent in 2024.”