KUALA LUMPUR: Malaysia's robust trade growth is expected to continue through 2024, after growing at the fastest pace in 21 months in July, economists said.
This would be driven by strong demand from advanced economies.
Malaysia's trade expanded by 18.3 per cent year-on-year (YoY) last month, marking the fastest growth in 21 months, thanks to higher shipments to advanced economies.
The trade value reached RM255.88 billion, the Investment, Trade and Industry Ministry said in a statement today.
The country's exports continued to rise for the fourth consecutive month, increasing by 12.3 per cent year-on-year to RM131.15 billion in July. Imports also saw a significant increase, surging 25.4 per cent to RM124.73 billion.
The trade surplus stood at RM6.42 billion, marking the 51st consecutive month of surplus since May 2020.
For the first seven months of 2024, Malaysia's trade expanded 9.8 per cent to RM1.652 trillion compared to the same period in 2023, setting a new record for periodic trade value.
Exports rose 5.1 per cent to RM862.23 billion, while imports increased 15.5 per cent to RM789.71 billion, resulting in a trade surplus of RM72.52 billion for the period.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the increased demand for semiconductor-related products will likely support Malaysia's export performance in the second half of 2024 (2H24).
However, he expressed concerns that slower growth in major economies like China and, to some extent, the US, could pose risks to the sustainability of this positive trend.
"Therefore, while the export outlook remains favorable, the stability of this positive trend will heavily depend on global economic conditions," he told Business Times.
Tradeview Capital fund manager Neoh Jia Man expects Malaysia's trade performance to continue to show positive growth in the coming months, although the pace may be slower than in July.
"The year-over-year growth figure for July 2024 is somewhat skewed due to the inclusion of two extra working days.
"The double-digit growth in exports (+12.3 per cent) was primarily driven by commodities like petroleum products and palm oil, which can be volatile," he noted.
Nevertheless, Neoh said the long-term outlook for Malaysian trade remains positive.
He said while sustained demand weakness from China and the downturn in the electrical and electronic industry may weigh on trade for the rest of the year.
"The significant increase in imports of intermediate goods (up 41.2 per cent) and capital goods (up 44.4 per cent) suggests that manufacturing activity in the country is picking up, which could support export growth in the coming months.
"Additionally, the strengthening ringgit is favorable for the import of consumption goods, which grew by 25.5 per cent last month," he said.
Meanwhile, the ministry attributed the growth in exports to higher demand for palm oil and palm oil-based agricultural products, machinery, equipment, and parts, petroleum products, as well as electrical and electronic (E&E) products.
Exports to major trading partners including Asean, the United States, the European Union and Taiwan, recorded double-digit growth.
Compared to June 2024, trade, exports, and imports increased by 7.6 per cent, 4.1 per cent, and 11.6 per cent respectively.
The ministry said that the strong growth in the second quarter of 2024 (Q2 2024) positioned the country well to achieve Bank Negara Malaysia's gross domestic product (GDP) forecast of four to five per cent for 2024.
Malaysia recorded robust GDP growth of 5.9 per cent in Q2 2024, which is expected to boost investor confidence and create further trade opportunities.
"Global economic conditions seem to have improved month by month, attributed to increased global demand," it said.