KUALA LUMPUR: RHB Investment Bank Bhd has maintained that the country's trade performance will likely improve by the second half of 2023 (2H 2023), following the anticipated recovery in the global economy.
In a research note, RHB Investment Bank said global growth would likely rebound by 2H2023 with the stabilisation of financial conditions as most major global central banks would have reached their peak policy interest rate objectives, and inflationary momentum would likely ease on a sustained basis.
“Exports are unlikely to collapse in 1H2023. Despite the contraction in the year-on-year term for March, we expect a continuous stabilisation in momentum for both exports and imports, suggesting that the bottoming out process in the export growth could ensue by early 2H2023,” it said.
Notwithstanding the slowdown in external demand, RHB Investment opined that the risks to Malaysia's economic growth would be limited.
“The domestic economy, which was buoyed by robust labour market conditions, continuation of large-scale infrastructure projects and a pickup in tourism activities, would continue to underpin the economy's momentum.
“Our detailed analysis suggests that the domestic economy is becoming larger and external dependency, particularly the labour market, on global economic conditions is falling,” it said.
Meanwhile, MIDF Research expects Malaysia's export growth to moderate to 6.2% this year from a previous forecast of 9.2%.
The research firm opined that imports would grow at 6.4% from a previous 9.5% forecast.
MIDF Research said the revision in the export forecast reflected the assumption that an anticipated boost from China's economic reopening would be delayed.
“We still expect recovering demand from China to impact Malaysia's trade later this year positively.
“In general, we maintain a cautiously optimistic view that trade will continue to grow, but the outlook can be constrained by elevated inflation, higher borrowing costs, and factors affecting supply (such as geo-political tension or trade disruptions) that will result in even weaker global demand,” it said.
MIDF Research said the positive growth in imports indicates increased purchases of foreign goods on the back of rising domestic spending and investment activities.
Earlier, the Ministry of Investment, Trade and Industry (Miti) announced that Malaysia's trade fell slightly by 1.6% to RM232.72 billion in March 2023, while exports declined 1.4% to RM129.71 billion and imports were lower by 1.8% to RM103.01 billion year-on-year (y-o-y).
MIDF Research said the decline was slightly sharper than its forecast and the market consensus as the firm predicted the high base effect and limited upside support from China's economic recovery would translate into weak year-on-year growth.
It said the decline was also attributable to lower domestic exports (4.1% y-o-y), in contrast to sustained growth in re-exports (10.3% y-o-y).
“We foresee the relatively lower commodity prices will likely influence trade performance in the next few months before the effect diminishes in the second half of 2023,” it added.
Source : The Edge Markets