Malaysia's exports are set to rebound to positive territory in 2024, supported by a re-acceleration in the global technology cycle as well as better economic prospects of major trade partners, despite the November export data coming in worse than consensus expectations, according to economists.
RHB economists said there is potential for export data to turn positive by the first quarter of 2024 (1Q2024), following a smaller contraction in export data during 4Q2023 compared with the first half of the year.
"We have begun to see more evidence of improvement in trade activities by regional economies in recent months.
Further out, the global growth is envisaged to accelerate in 2024 as rate normalisation may materialise in 2H2024 with [the US] Federal Funds Rate peak in 1Q2024, inflation risks to dissipate over the same period and China’s economic recovery by 2024," the economists said in a note on Tuesday.
The note was issued after the Department of Statistics Malaysia (DOSM) reported that the country's exports decreased 5.9% to RM122.1 billion in November, due mainly to lower demand for electrical and electronic products.
The contraction was worse than Bloomberg consensus estimate of a 5.2% decline, and RHB's projection of a 4.0% decline.
The November export performance was worse than expected due to weakness in electrical and electronic shipments as well as a sharper fall in exports to major destinations like China and the US.
Meanwhile, overall trade saw a moderate decrease of 2.4% year-on-year (y-o-y) to RM231.79 billion in November, said the Ministry of Investment, Trade and Industry.
However, Malaysia maintained its trade surplus during the month, valued at RM12.41 billion, making it the 43rd consecutive month of trade surplus since May 2020, albeit the smallest surplus in the three and a half years.
MIDF Research expects the momentum for external trade recovery to continue into 2024, following an upside bias in 4Q2023.
It maintained its forecast that exports and imports will recover next year, a pick-up from projected declines of 7.6% for exports and 7.0% for imports y-o-y, in 2023.
"Nevertheless, factors such as significant slowdown in final demand from the advanced economies, worsening of geopolitical and trade tensions and elevated price pressures, could adversely affect global trade outlook,"Â the research house contended.
Similarly, UOB expects an export growth rebound of 3.5% in 2024, reinforced by signs of a further recovery in the global tech cycle, an expected improvement in China’s economy and a projected soft landing in the advanced economies with gradual monetary policy loosening going into next year.
"That said, a potential escalation in geopolitical tensions (particularly Middle East conflicts and US-China tech war) and tighter-than-expected financial and monetary conditions are wildcards to our export growth outlook.
"Many key countries are also due to hold their presidential or general elections next year including the US (on Nov 5), Russia (March 17) and Taiwan (Jan 13). The election results will then shape the future geopolitical landscape and trade ties around the world,"Â the bank's economists said in a note.
Source: The Edge Markets