External Trade Performance Stronger than Expected

External trade maintained another month of robust expansion in Aug-22 showing total trade growth of +56.5%yoy to RM265.7b, as both exports and imports increased from previous month.

Exports growth picked up to +47.9%yoy, the strongest increase in 16 months and higher than our and market expectations partly because of the lower base in Aug-21.

The robust growth in Aug-22 also suggests correction in commodity prices and concerns about sluggish recovery in China have yet to affect Malaysia’s trade performance.

“In fact, close to 81% of the exports growth in Aug-22 was attributable to sustained foreign demand for E&E, oil & gas and palm oil products. We noticed the lower base in Aug-21 resulted in +111.2%yoy surge in re-exports, while domestic exports rose by +34.6%yoy which was the fastest expansion since Nov-21,” says MIDF.

Meanwhile, imports growth even jumped to +67.7%yoy, the fastest monthly growth on record and maintaining double-digit pace from Feb-21, driven by increased demand in the post-Covid recovery as Malaysia transitioned into endemic phase this year.

Higher trade surplus at RM16.9b

Trade surplus was higher at RM16.9b in Aug-22 (Jul-22: RM15.6b) because of larger monthly rise in exports (+5.4%mom) in contrast to imports (+5%mom). By sector, larger surplus in trade of manufactured goods (+RM16.4b) more than offset the smaller surplus in agriculture trade (+RM4.1b) and larger deficit in trade of mining goods (-RM2.2b).

For the manufactured goods, despite the higher imports of processed petroleum products, the sustained surplus in manufacturing goods trade was largely linked to higher surplus in E&E trade (+RM16.1b) and smaller deficit in transport equipment trade (-RM3.1b).

For agriculture trade, the lower surplus mainly reflects weaker trade of palm oil compared to previous month. For mining trade, the larger deficit was particularly due to larger imports of crude oil.

“Despite the larger import bills for both refined and crude petroleum, the higher surplus in Aug-22 indicates Malaysia’s gaining from increased external demand. However, the combined size of trade surplus in Jul-22 and Aug-22 was relatively lower than the same period last year (-7.5%yoy; 2QCY22: +3%yoy).

“In other words, we may expect smaller current account surplus in 3QCY22 due to faster rise in imports,” says the analyst firm.