KUALA LUMPUR: The recovering global economy and robust demand for emerging technologies are expected to spur Malaysia’s trade momentum going forward.
KAF Research, in a report, said the rising risk of a protracted war is likely to continue underpinning elevated commodities prices in the coming months.
“This is likely to contribute to increased export values, benefitting Malaysia’s merchandise trade and current account position.
“On the whole, we project Malaysia’s exports to advance 16.4% for 2022, while import growth is estimated to rise 18% this year. Import growth is expected to outpace export growth, in tandem with the recovery in the domestic economy as it recuperates some of the lost demand from the pandemic.”
Hong Leong Investment Bank Research, meanwhile, said the outlook for trade remains favourable for Malaysia, given its diversified export structure.
“As the economy fully reopens, export volumes are also expected to rise alongside support from high commodity prices. Nevertheless, there continue to be risks from ongoing geopolitical tensions and elevated inflation.
“We maintain our expectation for Bank Negara to increase the overnight policy rate by 50 basis points in the second half of 2022.”
AmBank Research has revised upwards its growth forecast for Malaysia’s 2022 trade performance. “We expect exports to grow by 26% in 2022 (from 8% previously), while imports by 25% (from 10% initially).
“The upwards revision is due to higher average selling prices, which is seen compensating for any shortfalls from volume affected by supply disruptions and labour shortages.”
For 2022, AmBank Research said its base-case gross domestic product growth projection remains unchanged at 5.6%, with an upside and downside of 6% and 4.8%, respectively.
“Growth will be supported by the full reopening of the economy and better vaccination management that will improve private consumption and business conditions.
“This will be strengthened by firmer commodity prices, continuous robust exports and manufacturing upswing, especially in the electrical and electronics sub-sector.”
Malaysia’s trade surplus declined to RM12.6bil last month, the smallest since May 2020. Despite being a shorter working month due to Hari Raya celebrations, May imports rose 3.6% month-on-month and 37.3% year-on-year, driven by intermediate and consumption goods.
CGS-CIMB Research said import growth may be an indication of a firm recovery in domestic demand.
“Exports declined 5.6% month-on-month in May, which translated to year-on-year growth of 30.5%. This was the strongest pace in 12 months, albeit due to a low base effect.”
Despite higher commodity prices in May, CGS-CIMB noted that export values fell for the second consecutive month after reaching a historic high of RM131.6bil in March.
“Apart from local factors, such as fewer working days in May and persistent labour shortage, risks of global demand destruction from high inflation and monetary policy discrepancies could also be at play.”
CGS-CIMB noted that this may increasingly dictate Malaysia’s export performance heading into the second half of 2022, as commodity price growth may already have peaked.
Source: https://www.thestar.com.my/business/business-news/2022/06/21/import-growth-likely-to-eclipse-exports