Senior Economist Julia Goh and Economist Loke Siew Ting at UOB Group assess the release of the trade balance figures in Malaysia.

Key Takeaways

“Both export and import growth fell short of expectations in Jul, moderating to 38.0% y/y (UOB est: +41.5% vs Bloomberg est: +39.0%, Jun: +38.7%) and 41.9% y/y (UOB est: +49.0% vs Bloomberg est: +46.9%, Jun: +49.2%) respectively. Trade surplus narrowed to MYR15.5bn last month (from +MYR21.9bn in Jun) as a result of faster import growth over that of exports in the month.”

“Jul’s export growth was primarily supported by resilient demand for manufactured goods (particularly electrical & electronics, refined petroleum and chemicals & chemical products) and mining goods as overseas sales of agriculture goods were weighed by lower crude palm oil (CPO) prices and Indonesia’s palm oil exports policy. Higher shipments to the ASEAN region, US, EU, China including Hong Kong and Japan were key export growth drivers last month, with the ASEAN region logging an all-time high export value for two straight months.”

“Despite strong double-digit gains over the past one year, export growth is set to taper in the greater part of 2H22 as favourable base effects wane, major commodity prices retreating lately, and as heightened global headwinds keep businesses and consumers in a more cautious mode. Locally, the ongoing shortages of foreign labour continue to constrain manufacturers’ production capacity, in addition to the shortages of raw materials, higher cost pressures and currency volatility. We keep our 2022 full-year export growth forecast of 18.0% (BNM est: +10.9%, 2021: +26.0%).”