Malaysia’s exports fell for a third straight month but at a marginal pace of 0.7% y/y in May (Apr: -17.6%). The contraction was very much milder than our estimate (-11.5%) and Bloomberg consensus (-12.0%). The same goes for imports, which tumbled by 3.3% (Apr: -11.1%). This led to a larger trade surplus of MYR15.4bn last month (Apr: +MYR12.6bn).  

A rebound in shipments of electrical & electronics (E&E), oil-related (i.e. LNG and refined petroleum) products, machinery, and optical & scientific equipment helped to aid overall exports in May. By geographical areas, a growth recovery in exports to major trading partners, namely Singapore, China, US, Japan, and South Korea, were the main reason behind the better-than-expected export outturn during the month. 

Despite the year-to-date (ytd) contraction in exports narrowing slightly to 2.3% in the first five months of 2023 (from -2.7% in Jan-Apr 2023), the unfavourable base effects and lingering downside risks (i.e. subdued global demand, easing commodity prices, and moderate recovery in China) continue to point to weak export growth momentum for the remaining months of the year. Hence, we reiterate our projection for export contraction of -7.0% for the entire year of 2023 (BNM est: +1.5%, 2022: +25.0%).