KUALA LUMPUR: Malaysia's trade prospects face heightened vulnerability, against the backdrop of a downturn in the semiconductor sector, geopolitical tensions, unpredictable commodity prices and slow global growth, economists said.
The situation raises concerns about how it might affect the domestic economy after the country's trade declined year-on-year (YoY) in October.
Malaysia's trade for October fell at a moderate pace of 2.4 per cent Y-oY compared with the double-digit decrease reported in the previous month.
Exports eased by 4.4 per cent and imports reduced marginally by 0.2 per cent, according to the Ministry of Investment, Trade and Industry in a statement.
The total trade, howqever, surpassed the RM2 trillion mark, reaching RM2.18 trillion from January to October, with exports amounting to RM1.186 trillion while imports were valued at RM995.55 billion.
Tradeview Capital Sdn Bhd vice president Tan Cheng Wen said although total trade surpassed RM2 trillion for the 10 months of 2023, it actually continued its declining monthly trend for the eighth month in a row.
This can be attributed to weaker commodity prices and sluggish global growth.
"Declines in our main trade partners such as Japan, Singapore, China and Thailand also contributed to slower exports.
"With the down cycle in the semiconductor sector, geopolitical conflicts, volatile commodity prices and lacklustre global growth continuing, Malaysia's trade outlook looks to be vulnerable to a multitude of factors," he told Business Times.
On that note, Tan said a potential lever to spur the country's trade performance would be the fruition of foreign direct investment commitments and sustained inflows.
Centre for Market Education chief executive officer Carmelo Ferlito expressed his concern about Malaysia's trade performance, emphasising that the sluggish trend is anticipated to persist in the upcoming months.
"International factors are already at play, together with lower commodity prices. So, we can only expect the situation to worsen," he noted.
In light of these challenges, he said the prevailing conditions are likely to deteriorate further, painting a gloomy outlook for Malaysia's economic prospects.
He added that a weak ringgit, influenced by declining trade numbers, may favour exports in the short run but make imports more expensive.
Meanwhile, the ministry noted that Malaysia's performance in October was similar with its key trading partners, notably China, Taiwan, and Indonesia which experienced negative trade growth and a reduction in global imports during the month.
For the period of January to October 2023, exports of manufactured goods weakened by 6.3 per cent to RM1.016 trillion compared to the same period in 2022, attributed to lower exports of petroleum products, palm oil-based manufactured products and rubber products.
However, exports of processed food, paper and pulp products as well as transport equipment recorded strong growth.
Trade, exports and imports each posted an 8.0 per cent decrease last month, compared to the corresponding period last year, while trade surplus was lower by 7.9 per cent, amounting to RM190.04 billion.
On a month-on-month (MoM) basis, Malaysia's trade in October expanded by 6.8 per cent to RM239.52 billion.
Exports increased by 1.5 per cent to RM126.19 billion and imports registered a double-digit growth of 13.4 per cent to RM113.33 billion.
Trade surplus reached RM12.87 billion, marking the 42nd consecutive month of trade surplus since May 2020.