Malaysia's export outlook remains uncertain amid sluggish global demand, say economists

KUALA LUMPUR, March 21 (Xinhua) -- Economists see Malaysia's export outlook will remain uncertain due to sluggish global demand.

Affin Hwang Investment Bank said in a note that in the near term, it believes global macroeconomic uncertainties will continue to weigh on trade activities, which pose downside risks to Malaysia's overseas demand, especially with negative events regarding the banking system in the United States.

Due to elevated inflation rate in major economies, it believes that the global financial condition will continue to tighten but at a slower pace in the short term.

Coupled with the prolonged Russia-Ukraine conflict, it said the risks from external factors tilted to the downside.

Taking into consideration the weaker-than-expected export growth, it is maintaining its projection that Malaysia's real gross domestic product (GDP) growth will likely slow to 3.7 percent in 2023 from 8.7 percent in 2022.

Meanwhile, Malaysia's real exports growth is expected to slow to 3.5 percent in 2023 from 12.8 percent in 2022, and real imports growth is anticipated to slow to 4.4 percent in 2023 from 14.2 percent in 2022.

The Public Investment Bank also said in a note that given the current macroeconomic environment characterized by a projected 4.1 percent year-on-year decline in worldwide semiconductor sales in 2023 to 556.5 billion U.S. dollars and the continued softening of overseas demand, it anticipates that Malaysia's trade performance will trend in tandem this year.

Moreover, the recent 18.5 percent year-on-year decline in monthly semiconductor sales, which reflects reduced consumer spending, fluctuated semiconductor demand, and heightened macroeconomic uncertainty, adds to its cautious outlook.

Despite some offsetting effects from China's full reopening in 2023, it believes that the balance of risks to Malaysia's trade performance remains tilted to the downside, owing to escalating geopolitical tensions, tightening financial conditions, and increasing probabilities of a global recession in advanced economies.

Given the possibility of local manufacturers scaling back production in anticipation of subdued global conditions, it estimates that Malaysia's real GDP growth will moderate to 3.8 percent in 2023 from a robust 8.7 percent in 2022.

It maintains its view that real export growth will moderate to 3.3 percent year on year in 2023 from a high of 12.8 percent in 2022, while real import growth is expected to slow to 4.8 percent year on year in 2023 from 14.2 percent in 2022.