China’s reopening, RCEP and CPTPP ratification will help boost Malaysia’s export growth, say economists
18 Jan 2023
Potential spillover effect from China’s reopening, and greater access to global markets following Malaysia’s ratification of the Regional Comprehensive Economic Partnership Agreement (RCEP) and the Progressive Agreement for the Trans-Pacific Partnership (CPTPP), will have a positive effect on Malaysia’s export growth in 2023, say economists.
However, they also warned that the expected slowdown in global growth, escalation of geopolitical tensions, trade war, and renewed pressure on the global supply chain could negatively impact the trade outlook.
The economists said this after the the Department of Statistics Malaysia announced on Wednesday (Jan 18) that Malaysia’s full 2022 export data rose 25% year-on-year (y-o-y) to RM1.55 trillion, driven by strong demand for electrical and electronic (E&E) products and higher commodity prices.
Last year’s full import data also rose 31.3% y-o-y to RM1.3 trillion due to the continued strong recovery in purchases of foreign-made intermediate goods and consumer goods.
The trade surplus increased 0.6% y-o-y to RM255.1 billion, the department said.
But on a month-on-month basis, export growth slowed to 6% in December from 15.1% in November, which was below the Bloomberg consensus of 8.8%. Import slumped to a 23-month low of 12% from 15.6% in November.
“In line with continued expansion in domestic spending, we noticed import growth continuing to surpass exports growth since September 2021 and even throughout 2022. This suggests the post-pandemic recovery in domestic economic activities continues to support strong imports,” said MIDF Research.
The research house expects continued growth in demand for electrical and electronics products and commodities to further boost Malaysia’s exports, while sustained rise in domestic spending and business activity will support the outlook for imports going forward.
“Taking into account the high base from the strong expansion last year, we project export and import growth to moderate to 9.2% (2022: 25%) and 9.5% (2022: 31.3%), respectively, this year,” MIDF said in a note.
Additionally, the RCEP (which was concluded in March last year) and the CPTPP (which was concluded last November) are also having a positive impact on exports, said UOB Global Economics & Market Research.
Its senior economist Julia Goh and economist Loke Siew Ting noted that the country has also signed a memorandum of cooperation with the US in May last year to expand semiconductor supply chain resilience between the two nations.
They also noted that the European Union had announced in December 2022 that 10 billion euros will be mobilised as part of the Global Gateway to accelerate infrastructure investments in Asean countries that will focus on energy, transport, digitalisation, education, and promotion of trade and sustainable value chains.
“All these are key positive catalysts for holding up Malaysia’s export growth prospects in the near term. This is further affirmed by MITI’s comments in its December trade report that exports to markets under the RCEP agreement posted double-digit expansion last year,” said Goh and Loke.
“For 2023, we expect exports to continue its moderating growth momentum and dip significantly to 1.5% (from the Finance Ministry’s estimate of +2.2%) from double-digit growth of 25% in 2022 (2021: 26.1%).
“It mainly takes into consideration the statistical base effects (after two consecutive years of robust gain in 2021-2022), softening global demand, ongoing global tech down cycle, exporters’ capacity in meeting environmental, social and governance market demand, and expectations for lower export earnings in light of stabilising commodity prices,” they added.
Source: The Edge Markets