It said the financial conditions are likely to stabilise during that period as most major central banks globally would have reached their peak policy interest rate objectives and inflationary momentum would likely ease on a sustained basis.
“Notwithstanding the slowdown in external demand, we think that the risks to Malaysia’s economic growth itself are limited.
“The domestic economy which was buoyed by robust labour market conditions, the continuation of large-scale infrastructure projects, and a pickup in tourism activities would continue to underpin the momentum of the economy.
“Our detailed analysis suggests the domestic economy is becoming larger and external dependency, particularly the labour market, on global economic conditions is falling,” it said in a note today.
The statistics department today revealed that Malaysia’s trade fell by 14.5% year-on-year (y-o-y) in April 2023 to RM198 billion amid global economic uncertainties.
During the same month, the export value also decreased by 17.4% y-o-y to RM105.4 billion, while the import value shrank 11.1% y-o-y to RM92.6 billion.
Chief Statistician Uzir Mahidin said the decline in Malaysia’s export performance was due to lower domestic exports.
RHB said the weakness in trade momentum is likely to persist for the remainder of the first half of 2023.
It added that the sharp contraction of April’s trade data is due to one-off factors and not the start of a new downward trend, with US firms likely cutting back on imports on the back of US banking sector risks and seasonal factors impacting imports from Malaysia by Chinese companies.
Negative export growth forecast
Meanwhile, MIDF Research has downgraded the 2023 growth forecast for exports to -3.4% and imports to -1.9%.
“While China’s recovery can be a boost to international trade activity this year, we view weak global demand (particularly for manufactured goods) in addition to limited upward pressures on prices and thus the high base would translate into slower external trade performance this year.
“In fact, we expect lower commodity prices will continue to affect resource-based exports in the next few months. Trade outlook could weaken further if global inflation remains high, central banks continue to tighten monetary policy and geopolitical risk deteriorates.”
Despite the weakness in external trade, it still expects Malaysia’s economic growth to remain positive, driven by sustained growth in domestic demand in view of the positive outlook for consumer spending and the job market.