Trade growth to stay strong despite domestic challenges

KUCHING: Malaysia’s trade performance is expected to remain strong despite the current challenges driven by the sharp resurgence of Covid-19 cases nationwide.

In a report, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) highlighted that Malaysia’s total trade soared by 43.2 per cent year-on-year (y-o-y) in April 2021 with exports skyrocketing by 63 per cent, the highest growth recorded since February 1998.

It further pointed out that exports to most of Malaysia’s key trading partners continued expanding sturdily in April 2021.

Constant double digit exports growth was observed to China at 28 per cent y-o-y, mainly buoyed by manufactures of metal (6.4 per cent contribution point to export growth) which increased by 126.4 per cent y-o-y, followed by LNG and petroleum products, among others.

Besides that, it noted that sales to the US climbed sharply by 128.6 per cent y-o-y contributed primarily by rubber products at 37 percentage points which grew 274.3 per cent y-o-y during the month amid progressive vaccination in the country.

In addition, such solid shipment to the US were also buoyed by optical & scientific equipment and wood products, among others.

By region, sales expanded further to both the EU (85.4 per cent y-o-y) and Asean (58.6 per cent y-o-y). Export rose for all Asean trading partners. Sales to Singapore in particular which hold more than 50 per cent of total export to Asean countries rose by 55.1 per cent y-o-y.

As exports grew substantially higher than import, trade surplus widened by 663.5 per cent y-o-y to RM20.5 billion.

“Malaysia trade performance is expected to rebound in 2021, carrying over the strong momentum in the 2H20 on the back of resumption in activities globally driven by a return to normalcy in global supply chain.

“Malaysia is benefitting from the strong recovery in our main trading partners mainly China and the US as reflected by sustained exports to the duo.

“Vaccine rollout along with massive fiscal and monetary policy support in major economies will boost demand. Investment appetite is also likely to improve propelled by better clarity amid vaccine availability,” MIDF Research said.

It highlighted that for the first four months of the year, exports and import growth averaged at 27.8 and 14.3 per cent y-o-y respectively.

“The growths are expected to remain elevated in the near months due to low base effect last year before moderating in 2H21 as the base effect dissipates,” it said.

Nevertheless, it said it remained cautious on the resurgence of Covid-19 cases in some key countries like Taiwan, Japan, South Korea, India, Thailand and Vietnam which could affect Malaysia’s exports demand moving forward.

“Nevertheless, robust performance in external trade serves as a buffer to risks of falling domestic demand associated to restrictions currently in place in order to curb the infectious Covid-19,” it opined.