The research house also maintained its projection that exports and imports will grow by 5.2% and 4.4%, respectively, this year.
“Apart from the turnaround in the global E&E market, we expect continued (albeit moderate) economic growth in China and the US to support export growth this year.
“Nevertheless, we opine that several downside risks could affect global trade this year, such as increased geopolitical and trade tensions, sharper slowdown in major economies and still sluggish global manufacturing activities,” MIDF said in a statement.
Given the sharper fall in exports and smaller trade surplus, the research house pointed out that external trade would be the reason behind more moderate economic growth for Malaysia in 2023.
“The country’s total trade declined sharply at 4.3% year-on-year (y-o-y) in December 2023, falling for the ninth consecutive month, reflecting the continued fall in exports, while imports increased for the second month,” it said.
It said the weak exports, together with growing imports, resulted in a reduced trade surplus of RM11.8 billion, the smallest surplus since June 2020.
“For the full year 2023, the 8% y-o-y decline in exports was larger than our estimate, taking into account the sharper fall in December 2023.
“Nevertheless, we still expect that the recovery in external demand will support better export performance, going forward, in view of better regional trade performance,” MIDF said.
The research house also forecasted that Malaysia’s external trade will remain in surplus with the expectation of improved E&E exports and overall external recovery.
However, it said the size of surplus may be capped by increased dependency on imports for products such as transport equipment, machinery, chemicals, agriculture products and crude petroleum.
Going forward, MIDF said it expects improved shipments to major markets such as China and the US to support external trade recovery in 2024.
“Nevertheless, demand from the US could be constrained by the high borrowing costs, which may lead to moderate US economic growth this year,” it added.