Malaysia: Exports unexpectedly contracted in March – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting review the latest trade balance figures in Malaysia.

Key Takeaways

“Gross exports posted its first month of contraction since Aug 2020 at 1.4% y/y last month (Feb: +9.8%), primarily reflecting the effects of high statistical base a year ago, dimmer world economic outlook, and global tech downcycle. The outturn came in line with our estimate (-1.5%) but better than Bloomberg consensus (-1.9%). Gross imports also reversed course and fell by 1.8% (Feb: +12.4%, UOB est: -0.5% vs Bloomberg est: -2.2%), the first y/y fall since Nov 2020. As imports dropped at a faster pace than exports, trade surplus widened to MYR26.7bn (from +MYR19.6bn in Feb).”

“In 1Q23, exports gained 2.8% y/y (4Q22: +11.8%) while imports rose 3.7% (4Q22: +18.5%), leaving a cumulative trade surplus of MYR64.4bn (4Q22: +MYR68.0bn). This is expected to translate into a current account surplus of MYR21.5bn last quarter (4Q22: +MYR25.7bn), according to our calculation. Actual 1Q23 current account data will be released on 12 May.”

“The negative turn in Malaysia’s exports last month is in line with our expectation as we have been long warning of a statistical payback after two consecutive years of high base effects, particularly from Mar onwards. Lingering global recession risks amid a tighter monetary policy environment will continue to suppress global demand this year. Expectations for a tightening of credit conditions following the recent global banking sector turmoil will further amplify the global recession risk and dent business confidence in the near term. As such, we maintain our cautious outlook for Malaysia’s exports with 1.5% growth for this year (BNM est: +1.5%, 2022: +25.0%, 2021: +26.1%).”