UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the recently published May trade balance figures.

Key Takeaways

“Export growth accelerated to a six-month high of 30.5% y/y in May (from revised +20.8% in Apr), in line with Bloomberg consensus (+30.3%) but undershooting our estimate (+35.5%). Import growth also hit a six-month high of 37.3% (Apr: revised +22.1%). This trimmed the trade surplus by 8.3% y/y to MYR12.6bn (Apr: +15.3% to MYR23.5bn) marking the smallest trade surplus since May 2020. This would weigh on the 2Q22 current account balance following an unexpected decline in 1Q22 current account surplus to the lowest since 2Q13 at MYR3.0bn or 0.7% of GDP.”

“May’s export gain continued to be propelled by higher commodity price earnings amid decent demand particularly for electrical & electronics (E&E), refined petroleum, and palm oil-based products. Overseas shipments to almost all export destinations recorded positive annual expansion.”

“While elevated global commodity prices continue to provide a boost to export earnings, we see Malaysia’s overall trade outlook facing multiple headwinds going into 2H22. This includes the Russia-Ukraine conflict, aggressive Fed rate hikes alongside Quantitative Tightening, and China’s zero-COVID stance which are fanning recession fears that will eventually weigh on export orders. We maintain our full-year export growth projection of 8.0% for this year (YTD as of May: 23.5%, BNM est: 10.9%, 2021: 26.0%).”