Malaysia’s January exports rise 1.6%, missing forecast; dragged by lower palm oil product exports

[KUALA LUMPUR] Malaysia’s external trade in January continued to expand at a slower pace due to lower exports of palm oil and natural rubber products.

Exports increased 1.6 per cent year on year in January, according to data from the Department of Statistics Malaysia (DOSM) released on Monday (Feb 20).

This was below the 7.4 per cent projection in a recent Reuters poll of 10 economists. The growth was also lower than the 6 per cent expansion in December last year. It is also the smallest gain since October 2020 and the fifth straight month of growth slowdown.

Imports growth dwindled to a 24-month low of 2.3 per cent year on year, reaching RM2.2 billion (S$667.2 million) in January, also lower than economists’ forecast of 10.1 per cent.

The country’s trade surplus narrowed by 2.1 per cent to RM18.2 billion in January as trade, exports and imports all declined.

On a month-on-month basis, exports declined 14.4 per cent. Imports were down 8.6 per cent, total trade fell 11.8 per cent and trade surplus fell 35.5 per cent. DOSM attributed the weaker performance to fewer working days amid the festive holidays.

In a statement released on Monday, Malaysia’s Ministry of International Trade and Industry said the country’s trade continued to expand in January, albeit at a slower pace, reaching RM207.5 billion.

“The export expansion was bolstered by petroleum, liquefied natural gas as well as electrical and electronic (E&E) products. Exports to major trading partners, notably Asean and Japan, recorded double-digit growth,” said the ministry.

The trade with Asean countries, accounting for 27 per cent of Malaysia’s total trade, increased 5.6 per cent to RM55.3 billion in January, with exports growing nearly 11 per cent to RM34 billion.

Singapore was the single largest recipient nation of Malaysia’s exports, constituting nearly 16 per cent of total exports. Shipments to the Republic rose 19 per cent to RM17.9 billion, supported by higher exports of E&E and petroleum products.

Shipments to China, which made up about 13 per cent of Malaysia’s total trade, the second-highest, fell nearly 12 per cent to RM15 billion, due to lower exports of iron, steel and petroleum products.

On a year-on-year basis, DOSM said exports of palm oil and palm oil-based products declined 22.7 per cent. Timber and timber-based products saw a 37.6 per cent fall, while natural rubber exports declined 33 per cent.

Refined petroleum products, which accounted for close to 10 per cent of total exports, expanded 97 per cent year on year. Liquefied natural gas, E&E and crude petroleum products registered growth of 62 per cent, 4.7 per cent and 26 per cent, respectively, in January.

Analysts observed that other than the sharp decline in agricultural product exports, the growth momentum of the E&E segment, which has been supporting the country’s trade, also weakened due to global headwinds.

Barclays regional economist Brian Tan said Malaysia’s tech exports have dipped further below trend levels, joining other major electronics producers in emerging Asia markets such as Taiwan and South Korea, which are grappling with the global tech downcycle.

UOB economists Julia Goh and Loke Siew Ting noted that Malaysia’s manufacturing purchasing managers’ index dipped to 46.5 points (versus 47.8 points in December 2022), indicating a further slowdown in the manufacturing activities.

Nevertheless, Goh and Loke said there would be some “wild cards” that could catalyse manufacturing activities – the potential spillover effect from China’s economic reopening, Malaysia’s trade diversifications to the global market as well as commodity price earnings.