KUALA LUMPUR (Oct 19): RHB Research is maintaining its export projection for Malaysia at 9.4% lower year-on-year (y-o-y) for 2023, compared with the Ministry of Finance's projection of a 7.8% decline.

Momentum-wise, the research house expects to see early signs of improvement in trade data by the fourth quarter of the year (4Q2023).

"The [y-o-y] contraction in export data will likely be extended into 4Q2023. But we expect a smaller contraction in export data by 4Q2023, with the potential for export data to turn positive by 1Q2024," RHB Research said in a note on Thursday.

More solid recovery is expected by the first half of 2024, it said, adding: "We begin to see some signs of dissipation of the downside risks — the global technology cycle downturn might be close to the end, and there are early signs of recovery in China's economy."

RHB Research said external demand would be bolstered by continued resilience of the US economy and improved economic momentum in the Asean region by 1Q2024.

“Exports to the US constitute around 11% of total exports, while exports to the Asean region account for about 28%,” it noted.

The research house expects growth in the US and regional economies to increase in 2024, as most of the policy rate hikes and monetary tightening are close to ending by 2023.

RHB Research said Malaysia’s exports are expected to be supported by an expansion in electrical and electronics (E&E) exports in the upcoming months.

It said improved demand for semiconductor and consumer E&E products, in tandem with the recovery of the global technology cycle, would likely support E&E outbound shipments.

On China, the research house said there are early signs of the country's recovery, as evidenced by improvement in consumer spending and industrial activities.

"As China is one of Malaysia's primary trade partners (exports to China account for 13% of Malaysia's total exports), higher demand from China would further fuel the export recovery in 1Q2024, it said.

Earlier on Thursday, the Ministry of Investment, Trade and Industry said Malaysia’s external trade contracted for the seventh consecutive month, but at a slower pace of 13.7% y-o-y in September, dragged by slowing global demand and lower commodity prices.

Year to date, Malaysia’s total trade, exports, imports and trade surplus have all demonstrated a downward trend. Total trade fell by 8.6%, consistent with decreases in exports of 8.4% and imports of 8.9%. The trade surplus decreased 5.7%, resulting in a value of RM177.3 billion.

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