MIDF Research expects Malaysia’s external trade activities to expand steadily beyond 2023 amid the impact of new trade agreements, apart from elevated commodity prices and lower monetary rates.
In a note on Thursday (Feb 2), it said the Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CTPPP) are also expected to alleviate the external trade performance in 2024.
“In the post-pandemic era, Malaysia has ratified the RCEP and CPTPP, which came into force on March 18, 2022 (RCEP), and Nov 29, 2022 (CPTPP).
“As of 2022, RCEP members contributed 58.1% of Malaysia’s total trade, while CPTPP members sponsored 27.5%,” it said.
Having these two free trade agreements (FTAs), the research house said Malaysian products are able to penetrate into wider markets and enjoy cheaper imported goods, hence the country’s growth rates would touch +12.1% (exports) and +10.9% (imports) in 2024.
Besides that, MIDF Research also viewed that the external front is still on a challenging path, with concerns over a global economic slowdown, inflation bite, tightening monetary policy in many countries, and geopolitical risks in Europe and Asia.
“We foresee slight moderation in the export growth forecast from +25% year-on-year (y-o-y) in 2022 to +9.2% y-o-y in 2023.
“On the bright side, China’s reopening provides a silver lining for global trade flows. Malaysia’s export market can still hold, underpinned by, among others, overseas sales of commodity products with commodity prices remaining elevated, crude palm oil at RM3,500 per tonne, and Brent crude oil at US$94 per barrel for 2023,” it said, adding that it maintained its "neutral" stance on the plantation sector.
As for imports, it is forecast to grow 9.5% y-o-y, higher than exports, as the research house expects domestic demand to stay sturdy.
On the plantation sector, MIDF Research anticipated that the palm oil supply tightness situation would likely ease in 2023, on better weather conditions aided by a recovery from the foreign labour shortage in the second half of this year.
Meanwhile, it reiterated its "positive" call for the oil and gas sector, despite an estimated average price of US$92 per barrel of Brent crude in 2023, compared with US$98 per barrel last year, due to risks and uncertainties from Russian oil and gas sanctions, US production, and China’s long-term demand.
“We also maintain a favourable outlook on the semiconductor sector in 2023, due to its ongoing growth potential driven by advanced technologies, and we believe that the recent decline in the tech sector has been overstated, offering opportunities for forward-looking investors to invest in growth stocks,” it said.
Source: The Edge Markets