PETALING JAYA: Looking beyond 2023, MIDF Research said it is positive on Malaysia’s external trade outlook due to the ratified Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
In its thematic report, Remarkable Post-Pandemic External Trade Performances, the research house said that apart from elevated commodity prices and lower monetary rates, external trade activities of Malaysia are anticipated to expand steadily amid impact from new trade agreements.
“As of 2022, RCEP members contributed 58.1% of Malaysia’s total trade while CPTPP members sponsored 27.5%. Even though RCEP held larger contribution of the total trade, Malaysia’s trade surplus with CPTPP members higher at RM132.9 billion versus RCEP members RM89.6 billion in 2022,” it said in a statement yesterday.
MIDF Research foresees slight moderation in export growth, from 25% year-on-year (y-o-y) for 2022 to 9.2% y-o-y for 2023.
“Malaysia’s export markets can still hold, among others, underpinned by oversea sales of commodity products with prices remain elevated, crude palm oil at RM3,500 per tonne and Brent crude oil at US$94 barrel for 2023. As for imports, strong domestic demand and improving local activities led to higher inbound shipments, averaging 31.3% y-o-y for 2022. Import growth forecast is set to touch 9.5% y-o-y, higher than exports as we view domestic demand to stay sturdy,” the research house said.
Malaysian exports surged 25% last year, sustained double-digit yearly growth for the second year compared with 26.1% in the year prior, underpinned by strong demand for electrical and electronics (E&E) products as well as diversified export products.
Malaysia gained from external demand for commodities particularly crude oil and petroleum products, LNG and palm oil and palm oil-based products, it noted.
“To a certain extent, the robust growth in commodity exports was also boosted by higher commodity prices, while growing exports of manufactured goods reflect improved easing constraints on the global supply chain. Imports, on the other hand, grew by 31.3%, stronger than 23.3% expansion in 2021.
On the ratio to gross domestic product (GDP), it said that exports’ contribution to the economy surged to 94.7% in 2022 compared with 81.9% in 2021, the highest since 2007.
The re-exports-to-GDP ratio skyrocketed to a record high at 20.2% while contribution by domestic exports at 74.6%, highest since 2009. Imports’ ratio jumped from 65.2% in 2021 to 79.2% in 2022, 16-year high. Nevertheless, net exports contri-bution moderated from 16.7% in 2021 to 15.6% last year.
MIDF Research opined that the strong import growth underpinned by domestic economic reopening outperformed the export expansion rate – which drove the lower net export contribution.
In addition, labour and input shortages as well as oilfield maintenance works among others limited industrial production activities and outbound shipments last year.
Looking into exports, domestic shipments continued to dominate with 78.7% while re-exports hit a new peak point of 21.3% in 2022.
Additionally, the research house observed that the external front remained challenging, particularly with concerns of a global economic slowdown, inflation bite, tightening monetary policies in many countries and geopolitical risks in Europe and Asia.
Last year, 28.6% of Malaysia’s total trade occurred in Johor, which outpaced Penang (27.4%) and Selangor (28.2%). Johor hit its highest record share of national total trade in 2022.
“The rise was in line with the expansionary trends seen in seaports and land gates in the state such as Pasir Gudang, Tanjung Pelepas Port, Tanjung Kupang and Tambak Causeway,” MIDF Research said.
“Even though lower share, trade value via Bayan Lepas and Butterworth grew steadily by 20.1% and 6.6% respectively last year.
Selangor, another key state, saw its external trade increase by a low single-digit rate of 3.9%, dragged down especially by a marginal expansion rate of 0.8% in Port Klang, MIDF Research added.