UOB Group Senior Economist Julia Goh and Economist Loke Siew Ting comment on recently released trade balance figures for the Malaysian economy.
Key points to remember
“Malaysia’s foreign trade outperformed last month, with total trade, export and import values surpassing all-time highs. Growth in exports (June: +38.8% y/y, May: +30.4%) and imports (June: +49.3%, May: +37.3%) exceeded our estimates (exports : +18.5%, imports: +34.0%) and Bloomberg consensus (exports: +21.2%, imports: +32.0%), leaving a larger trade surplus of MYR 21.9 billion in June (May: +12.7 billion MYR).
“Jun’s export growth was primarily driven by increased demand for electrical and electronic (E&E) products and commodity-related products (i.e. refined petroleum, liquefied natural gas (LNG) and palm oil) in a context of higher commodity prices. Overseas shipments to most trading partners also recorded strong increases, with exports to the ASEAN region, Japan and New Zealand jumping by more than 50%. The highest monthly export value was also recorded to ASEAN, USA and EU.
“We are raising our forecast for export growth for the year 2022 to 18.0% (from 8.0% previously, BNM is: +10.9%, 2021: +26.0%) after taking into account a robust export growth of 26.1% in 1H22 and expectations of a slowdown in exports. 2H22 growth momentum driven by rising cost pressures, shortages of raw materials and foreign labor and currency volatility. Moreover, there are signs that the global technology cycle is entering a phase of weakness. The near-term outlook for Malaysia’s palm oil exports is also clouded by the recent sharp drop in crude palm oil prices as well as Indonesia’s oversupply and the removal of the export.