KUALA LUMPUR: Malaysia may be able to maintain its trade momentum this year, despite slower economic growth due to the expected global recession, economists said.
They said while global trade would be hampered by the expected downturn in the US and Europe, China's reopening would be a big boost for Malaysia particularly. China is Malaysia's largest trading partner.
Malaysia's trade with the world should also receive economic jolt from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) as well as the Regional Comprehensive Economic Partnership (RCEP).
Franklin Templeton vice president and portfolio manager of emerging markets equity Edward Pang said China had dismantled its zero-Covid policy, and the swift reopening of its economy would help to ease supply chain issues and normalise regional economic activity.
"This may partially offset the anticipated recession in the US and European Union (EU). We believe Malaysia's neutral status in the ongoing global trade tensions is a golden opportunity for it to capture a bigger slice of the pie. Specifically it is well placed to benefit from a "China Plus One" (C+1) strategy in the electrical and electronic (E&E) industry.
"The E&E industry in Malaysia has an established ecosystem of ancillary industries, supported by a pool of talent with multilingual capability. We are witnessing semiconductor companies in Malaysia expanding their products and services portfolio, putting great efforts to move up the value chain and moving towards industry 4.0 direction," Pang added.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid agreed that it would "undeniably hard" for Malaysia to maintain last year's explosive trade growth with the global recession around the corner.
"But if we can maintain the trade value, it will be good for the country's economy. The developed markets in Europe and the United States are struggling to avoid the downturn which will, however, be overcome by the reopening of China.
"Certainly the reopening of China will be a great boost to our trading global status," Aimi Zulhazmi told the New Straits Times.
Malaysia's trade surpassed RM2 trillion for the second consecutive year in 2022, registering the fastest growth since 1994, with exports expanding 25 per cent to RM1.55 trillion.
Imports breached RM1 trillion for the first time, soaring 31.3 per cent to RM1.29 trillion.
International Trade and Industry Ministry late last week said the trade surplus had increased by 0.6 per cent to RM255 billion, representing the 25th consecutive year of surplus since 1998.
Exports of manufactured, agriculture and mining sectors registered an all-time high with double-digit growth.
This was driven by robust exports of E&E products, petroleum products, liquefied natural gas, palm oil and palm oil-based agriculture products, crude petroleum as well as machinery, equipment and parts with each product recording more than RM10 billion increase with double-digit growth.
Aimi said besides RCEP, Malaysia was poised to explore new markets following the ratification of the CPTPP in November 2022.
"The new markets include Canada, Peru and Mexico, which are removing the key import duties in line with the trade agreement."
Canada was removing duties on 96.6 per cent of its tariff lines, Mexico was offering duty-free treatment on 80 per cent of its tariff lines, while Peru had eliminated duties on 86.2 per cent of its tariff lines, he added.
Putra Business School MBA programme director Prof Dr Ahmed Razman Abdul Latiff said Malaysia's exports to the RCEP markets would further increase this year. This was due to advantages the country offered to the members in form of reduced or removal of import duties as well as ease of doing business among the members.
Ahmed Razman said local manufacturers had started to reduce import of raw materials and components of their products and also use up their existing inventories.
"This signals a slower demand for their exported products. Nevertheless certain segments remain strong such as E&E and petroleum due to sustained demand and high prices of oil," he added.
On concerns about the (EU ban on palm oil products, Ahmed Razman said the bloc only imported less than 10 per cent of what Malaysia exported to the overseas market.
"So the impact from the EU restriction will be minimal, unless such action is followed suit by other countries. Nevertheless, greater cooperation between Malaysia and Indonesia who are the top two palm oil producers in Malaysia will ensure that revenue potential will be supported," he added.