KUALA LUMPUR: Malaysia is on track to beat its 2023 performance after posting its highest historical first quarter trade, export and import values in the January-March 2024 period, economists said.
Its sizeable trade surplus as of Q1 will help the country sustain its current account surplus, thereby bolstering liquidity within the economy, they added.
Malaysia's total trade expanded 7.1 per cent to RM690.59 billion year-on-year in Q1 2024, with a trade surplus of RM34.22 billion, according to the Investment, Trade and Industry Ministry on Friday.
Exports, however, fell 0.8 per cent year-on-year in March, a smaller decline than economists had forecast.
Exports had been expected to fall 2.1 per cent last month, according to 16 economists surveyed by Reuters.
Compared to February, Malaysia's trade, exports and imports last month showed double-digit growths of 15.6 per cent, 15.5 per cent and 15.7 per cent respectively.
"The total trade was RM244.47 billion, historically the highest value for the month of March," the ministry said.
Exports amounted to RM128.64 billion and imports were valued at RM115.83 billion last month, resulting in a trade surplus of RM12.81 billion, which represented the 47th consecutive month of surplus since May 2020.
UOB senior economist Julia Goh and economist Loke Siew Ting said the Q1 exports turned around to grow for the first time in a year by 2.2 per cent year-on-year (Q4 2023: -6.9 per cent) while imports increased further by 13.1 per cent (Q4 2023: +1.3 per cent).
This leaves a cumulative trade surplus of RMR34.2 billion in Q1 2024 (Q4 2023: RM36.9 billion), which is expected to translate into a current account surplus of RM0.5 billion (Q4 2023:RM0.3 billion).
Actual Q1 2024 current account data will be released on May 17, together with the Q1 2024 final GDP numbers.
Goh and Loke kept a cautiously optimistic outlook for Malaysia's trade sector with a moderate export growth forecast of 3.5 per cent for this year versus Bank Negara Malaysia's estimate of 5.0 per cent.
This is mainly premised on the downside risks from escalating geopolitical tensions in the Middle East and higher possibility of tighter monetary conditions among developed economies for a prolonged period.
UniKL Business School economic analyst associate professor Dr. Aimi Zulhazmi Abdul Rashid said the RM34.22 billion trade surplus recorded for the first quarter is "not only remarkable but indicates positive momentum and turnaround" in the country's international trade challenging global economic outlook.
Aimi added that based on the upward cycle of the electronics and electrical (E&E) industry, the trade in 2024 is on track for a better performance than the whole of 2023.
"Nonetheless many advanced economies are still struggling to boost their economies, fighting on all fronts from high inflation cost to high financing cost," he told Business Times.
He noted that the latest International Monetary Fund (IMF) forecasts that Malaysia will likely post a gross domestic products (GDP) growth of 4.4 per cent indicates a positive perception among foreign investors.
It also shows that Malaysia is still an attractive investment hub for the region.
"The commitment of the government to attract foreign direct investments and encourage domestic direct investments are well regarded by outsiders," he added.
He said Malaysia, which is among the world's top 25 trading nations, has been affected by worldwide economic patterns. However, the latest trade performance suggests that the country is dynamic and resilient enough to endure significant pressures.
"China being Malaysia's largest trading partner for the last 12 years reported significant GDP growth of 5.3 per cent in Q1, which is better than forecast. This certainly augurs well for the global trade including Malaysia's in 2024," he noted.
Aimi said the ongoing geopolitical crisis in Europe and Middle East is a concern to global economic growth.
"The Middle East crisis will have a major impact at least on the global crude oil price. Inflation will continue to be high especially in the US, with the reduction of the US Federal Reserve (US Fed) interest rates may still be far away than estimated.
"This will further strengthen the US dollar and weaken many countries' currencies including the ringgit. Cost of imported goods will be more on foreign exchange alone," he added.
Bank Muamalat Bhd chief economist and social finance head Dr. Mohd Afzanizam Abdul Rashid said Malaysia's trade performance could be an opportunity to enhance the integration of micro, small, and medium enterprises into the global economy.
This will ensure they have improved access to new markets.
"In that sense, multilateral trade such as Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership could offer further upside to them," he added.
Afzanizam pointed out that the steep contraction in the palm oil-related products, other vegetable oils, sawn timber and moulding, seafood, fresh, chilled or frozen and saw logs were the main underpinning factors for a dismal performance in the agricultural sector.
"Apart from that, electrical and electronics (E&E) products were also down by 1.5 per cent during the month although smaller than the 9.7 per cent decline in February," he said.
Afzanizam observed that the overall performance was varied and indicated that external demand remains highly unpredictable.
"We have seen other jurisdictions experiencing contraction in exports such as Singapore and China where both countries reported a negative print of 20.7 per cent and 7.5 per cent during March," he added.