Malaysia: Export unexpectedly slumped in August – UOB

Malaysia’s gross exports recorded a steeper-than-expected decline of 18.6% y/y in Aug (UOB est: -15.0%, Bloomberg est: -16.3%, Jul: -13.0%). It also marked the biggest fall since May 2020 and sixth straight month of contraction, which is the longest declining streak since late 2008. The same goes for imports, which dropped for a sixth consecutive month and the most since May 2020 by 21.2% (UOB est: -18.8%, Bloomberg est: -19.0%, Jul: -16.1%). This resulted in a trade surplus of MYR17.3bn last month (Jul: +MYR17.4bn).   

Given that Malaysia’s exports have underperformed over the past three months amid ongoing headwinds, we downgrade our full-year export outlook to -9.0% for 2023 (from -7.0% previously, 2022: +24.9%). However, smaller base effects as well as expectations of an upturn in global tech cycle and firmer commodity prices could lift overall exports going into 4Q23 and next year, whereby the export contraction is expected to narrow in 4Q23 before turning positive from 1Q24 onwards. A pause in global interest rate hikes and more resilient global outlook are potential catalysts for export prospects in 2024. We forecast Malaysia’s exports to reverse and expand by +3.5% in 2024.