KUALA LUMPUR: Malaysia's export momentum will likely continue to be driven by manufacturing and agricultural goods in 2021 due to massive global fiscal expenditure.
Public Investment Bank Bhd (PublicInvest) economist Dr Rosnani Rasul said in addition, demand for electrical and electronics (E&E) would get a boost from global pandemic conditions given the expected continuation of virtual learning and work-from-home arrangements.
"Demand for E&E will also be lifted by structural changes in the global telecommunication sector (migration from 4G network to 5G by 2025) that will push demand for handphones and smart devices," she said in a research note today.
She said the projected expansion in Organisation of Petroleum Exporting Countries (OPEC)+ output and an expected turnaround in oil prices would also be a boon for mining exports.
Malaysia's solid exports form is in lock-step with the regional trend, which benefitted from full economic openings in ASEAN and advanced economies (AEs).
Indonesia led the rise in ASEAN exports growth for June (54.4 per cent), Thailand (43.8 per cent), Malaysia (27.2 per cent), Vietnam (17.3 per cent) and Singapore (15.9 per cent), thanks to a sustained rebound in global commodity prices, a boon for major producers like Malaysia crude oil, natural gas, crude palm oil (CPO) and Indonesia (CPO, crude oil, coal, nickel, tin).
She said ASEAN exports are expected to remain strong in the third quarter this year before normalising in the fourth quarter, thanks to the revival in global demand and global pandemic conditions that will push demand for agriculture, commodity and manufacturing goods.
"This will be supported by the expected turnaround in mining exports consistent with the OPEC+ output adjustment that will continue into 2022, an encouraging growth driver for major producers like Malaysia, Indonesia and Thailand."
She said exports would also benefit from a low base advantage following Covid-19 containment measures last year that led to supply and demand interruptions (lockdown, closures) - a protracted turnaround that is expected to be consistent across the region.
"ASEAN exports may still be susceptible to the risks of US-China second trade talk apart from the global resurgence in Covid-19 infections that may lead to pockets of containment measures."
Rosnani said Asean exports are likely to gain from favourable external conditions, especially due to the region's major global producer for key products such as manufacturing, agriculture and mining.
"This will be further pushed by global pandemic condition and rapid structural changes in global telecommunication industry - a boon for E&E goods."
She said the switch in spending from services to manufacturing thanks to savings accumulated during the pandemic would also bode well for E&E.
However, this sanguine outlook may be tempered by the sharp resurgence in global Covid-19 infections following the emergence of variant (Delta, Lambda), she cautioned.
"ASEAN could bear the brunt of this amid a sizeable number of its population that has yet to be inoculated. This could lead to interruption in supply and demand conditions and, therefore, the trade momentum," she added.
Hong Leong Investment Bank Bhd (HLIB Research) said new export orders for purchasing managers index (PMI) has eased to 53.2, indicating a moderation in global trade growth as the broader economic reopening in advanced economies set off a gradual shift in demand from goods to services.
"While the robust external demand and ramp-up in vaccination rates offer some reprieve to Malaysia's economy,
"The reopening timeline hinges on the success in containing the spread of the virus and its more transmissive variants, as well as alleviating the strain on healthcare facilities across states," it added.