Malaysia: Export growth surprised to the downside in October – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the recently published trade balance results in Malaysia for the month of October.

Key Takeaways

“Malaysia’s export growth came off for the second straight month and hit the lowest in 15 months at 15.0% y/y in Oct (Sep: +30.1%). It also undershot our estimate (+27.5%) and Bloomberg consensus (+24.7%). The same goes for import growth which decelerated to a six-month low of 29.2% (Sep: +32.8%). This pulled trade surplus down significantly to MYR18.1bn last month from a fresh record high of MYR31.8bn in Sep.”

“All but energy related products saw weaker demand during Oct, led by electrical & electronics (E&E) products, palm oil & related products, as well as manufactures of metal. Shipments to almost all trading partners also recorded slower increases, with exports to the US, EU and China logging just a single-digit rise.”

“Recent external trade growth outturns in Sep-Oct suggest that Malaysia’s merchandise trade activity has entered a soft patch in tandem with weakening global demand. Volatile commodity prices and exchange rates were also factors weighing on the trade growth momentum amid global tech down cycle. Moreover, other global leading indicators continue to point to rising recession risk going into 2023, sparked by prolonged Russia-Ukraine war, tighter global monetary and financial conditions, as well as China’s COVID-19 Zero policy. Hence, we maintain our cautious outlook on Malaysia’s exports with a marginal gain of 1.5% for 2023 versus an estimated 26.0% expansion for 2022.”