Singapore’s UOB has raised Malaysia’s full-year trade growth forecast to 18 per cent, from eight per cent previously, after taking into account robust export growth of 26.1 per cent in the first half of 2022 (1H22).
Expectations of softer export growth momentum in 2H22 was also considered for the bank’s growth forecast.
UOB economists Julia Goh and Loke Siew Ting stated that manufacturers continued to face rising cost pressures, shortages of raw materials or supply chain disruptions, and currency volatility caused by the ongoing Russia-Ukraine conflicts, China’s zero-Covid policy and aggressive US Federal Reserve rate hikes.
“Locally, shortages of foreign labour will further constrain manufacturers’ production capacity amid decent demand.
Moreover, they said growing worries of a global recession, high inflation and currency fluctuations would keep on influencing business and consumer decisions in spending for discretionary items particularly electrical and electronic (E&E) products including devices in the near term.
This is despite potential increased demand from China which made up 12 per cent of Malaysian palm oil exports in 2021.
“Surging supplies in global top exporter Indonesia and its removal of export levy for all palm oil products until August 31, 2022 could further depress CPO prices and affect Malaysia’s palm oil shipments over the next few months,” they said.
UOB said Malaysia’s external trade outperformed last month with total trade, export and import values breaching their all-time highs.
Gross exports surged 38.8 per cent year-on-year (YoY) in June, marking the biggest gain since May 2021.
“It also surpassed our estimates (18.5%) and Bloomberg consensus (21.2%).
“On a month-on-month basis, exports rebounded by 21.3 per cent after contracting for two months by 5.6 per cent in May.
“In second quarter (2Q) 2022, exports grew 30.0 per cent from a year ago, an acceleration from the 22.0 per cent annual growth recorded in 1Q22. This brought 1H22’s export growth to 26.1 per cent (1H21: +30.3 per cent),” they said in a note.
The stronger-than-expected export growth in June could partly be credited to the easing of Covid-19 lockdown in China and higher global oil prices.
Most trading partners posted higher demand for Malaysian products last month, with exports to the Asean region, Japan, and New Zealand surging more than 50 per cent.
They said shipments to Asean as a whole jumped 55.2 per cent YoY to RM41.6 billion in June, marking the highest monthly value.
“The expansion was contributed by higher exports of electrical and electronic (E&E) products to Singapore, refined petroleum products to Indonesia and the Philippines, liquified natural gas to Thailand, and crude petroleum to Vietnam,” they said.
Exports to the US expanded by 30.6 per cent to a record high value of RM16.9 billion while overseas shipments to the European Union (EU) jumped 39.4 per cent to a new record high of RM12.5 billion
Exports to Japan surged 55.8 per cent while exports to China rose at a slower pace by 4.2 per cent.
They noted imports gained the most since Feb 1998 by 49.3 per cent YoY last month.
By sector, the overall import growth in June was largely bolstered by stronger imports of manufacturing and mining products. – NST ONLINE
