Growth Momentum to Continue Despite Concerns Over External Developments

Total trade growth moderated to +31.4%yoy in Sep-22, but the total trade value remained above RM250b for the fourth straight month. Exports grew further at +30.1%yoy (Aug-22: +48.1%yoy), maintaining double-digit growth for the 14th consecutive month.

Growth Momentum to Continue Despite Concerns Over External Developments
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Malaysia’s leading index (LI) sustained annual increase of +4%yoy in Aug- 22 (Jul-22: +4.1%yoy), backed by increased real imports of other basic precious and non-ferrous metals, higher number of housing units approved and increased company registration.

On month-on-month basis, LI rebounded by +1.6%mom (Jul-22: -2.0%mom), says MIDF in a featured report on the Malaysian economy.

Total trade growth moderated to +31.4%yoy in Sep-22, but the total trade value remained above RM250b for the fourth straight month. Exports grew further at +30.1%yoy (Aug-22: +48.1%yoy), maintaining double-digit growth for the 14th consecutive month.

"Malaysia’s economy to grow by +6.6% this year. Recent indicators indicated sustained positive growth with expanding domestic demand and robust external trade performance. while growth momentum generally remained positive, we remained cautious of possibly weaker global outlook. On that note, we maintain our forecast for Malaysia’s GDP growth this year at +6.6%."

LI still points to sustained growth

Malaysia’s LI sustained annual increase of +4%yoy in Aug-22 (Jul-22: +4.1%yoy), backed by increased real imports of other basic precious and non-ferrous metals, higher number of housing units approved and increased company registration.

On month-on-month basis, LI rebounded by +1.6%mom (Jul-22: -2.0%mom) following higher real imports of semiconductors, higher housing approvals and growth in money stock (M1). Meanwhile, the current economic economic condition showed a more normalized growth as the rise in coincident index (CI) moderated further to +9.8%yoy (Jul-22: +12.5%yoy).

Increased industrial production and retail trade as well as higher capacity utilization contributed to the CI growth in Aug-22.

"Given the sustained growth in LI, we expect growth momentum to remain positive in the coming months and the pace of growth is expected to be more normalized as the low-base effect, as a result of the nationawide lockdown last year, diminishes," say the analysts.

More normalized growth

External trade performance remained robust in Sep-22, albeit annual growth was relatively slower than Aug-22. Growth in total trade was more moderate at +31.4%yoy in Sep-22, but the total trade value remained above RM250b for the fourth straight month.

Exports grew further at +30.1%yoy (Aug-22: +48.1%yoy), maintaining double-digit growth for the 14th consecutive month. The moderation was expected given the higher base in Sep-21. Nearly half (or 48.9%) of the increase in exports in Sep-22 was underpinned by demand for E&E, and another 38.9% of the export growth was from higher shipments of oil & gas products (especially refined petroleum and LNG).

On another note, growth in re-exports remained relatively stronger at +46.4%yoy (Aug-22: +112.4%yoy) vis-à-vis domestic export growth which moderated to +25.9%yoy (Aug-22: +34.8%yoy).

Similarly, import growth slowed to +33%yoy in Sep-22 (Aug-22: +67.4%yoy) as imports moderated for intermediate and consumption goods, in contrast to stronger capital goods imports. Nevertheless, the continued double-digit import growth since Feb-21 suggests the positive effect from economic reopening and growing domestic demand.

On balance, RM31.7b trade surplus in Sep-22 is the highest monthly surplus on record mainly because lower imports (-9.4%mom), attributable to the correction in global commodity prices.