KUALA LUMPUR: Sustained recovery in the global economy will continue to drive external demand for Malaysia's manufactured goods and primary commodities, MIDF Research said.
The firm said the outlook might be adversely impacted by weaker global growth in view of downside risks from higher global inflation, possible recession in the United States, sluggish recovery and strict zero-Covid policy in China, ongoing war in Ukraine, and recent escalation of geo-political tension between China and Taiwan.
"Nevertheless, we foresee sustained recovery in the global economy, as countries reopen their economies and ease Covid-19 restrictions, will continue to drive external demand for manufactured goods (i.e. E&E and refined petroleum) and primary commodities.
"We also expect imports to expand further in the coming months as growth momentum in the domestic economy is expected to continue in the latter part of the year," it added.
Malaysia's total trade continued to grow in July this year with total trade standing at RM252.6 billion, the second highest after record high RM270.1 billion in June 2022.
MIDF Research said Malaysia's exports growth in particular was sustained at 38 per cent year-on-year (yoy), somewhat higher than its estimate driven by demand for major products such as electrical and electronic (E&E), petroleum (both processed and crude), palm oil and liquefied natural gas (LNG).
"We anticipated recent corrections in commodity prices and weaker demand from China would start to hit export performance.
"The official number is better than expected, also due to lower base in July 2021 which explained the stronger expansion in domestic exports at 33.4 per cent yoy," it said.
MIDF Research said exports of E&E and petroleum remained the main source of growth for the country's total export.
By sector, the firm said E&E exports moderated to 35.2 per cent yoy but remained the major contributor to overall exports growth in July 2022, mainly due to rising demand for semiconductors.
"Another source of export growth comes from petroleum exports, both crude and refined petroleum products," it said.
Although the July 2022 numbers were better than expected, MIDF Research maintained its forecast for exports and imports to grow at 20.9 per cent and 25.6 pef cent respectively this year.