The investment bank highlighted that while export growth has reached 6% for the first eight months of 2024 year-on-year (yoy), up from 5.1% in the seven months, it is still below the full-year target.

“Despite positive momentum, downside risks to export growth are rising. These include a potential US economic slowdown and a weaker-than-expected recovery in China.

“Notably, exports to China have dropped 2% year-to-date, but this was partly offset by strong US demand, which surged 18.8% over the same period,” it said in its latest Economic Viewpoint.

Kenanga IB said a significant weakening in the US economy could threaten Malaysia’s export outlook.

“Additionally, as imports continue to grow faster than exports, we expect a narrowing trade surplus in the near term, which could pressure the current account balance,” it noted.

Malaysia’s trade continued its stellar performance in August, growing 18.6% year-on-year to RM252.65 billion, the fastest growth rate in 22 months.

Exports eased slightly to 12.1% in August compared to July’s 12.3% but beat the 11.8% consensus expectations.

Imports also surged to a 22-month high at 26.2%, far exceeding the consensus estimate of 21.2%.

Kenanga IB said it remains optimistic about Malaysia achieving a gross domestic product (GDP) of 5% this year following its strong first-half performance.

“Growth is expected to remain resilient for the rest of the year, driven by robust domestic activity and improving external trade, supported partly by a low base effect.

“However, we project growth to moderate to 4.8% in 2025, as global growth, especially in advanced economies, is anticipated to slow,” it noted.