Photo taken on March 18, 2016 shows people taking photos in front of the Petronas Twin Towers in Kuala Lumpur, Malaysia. (Photo by Chong Voon Chung/Xinhua)
Economists say a heightened global recession risk will likely cause stagnant global trade growth, posing downside risks to Malaysia's overseas demand.
KUALA LUMPUR, Jan. 20 (Xinhua) -- Malaysian economists have said that a global economic downturn is expected to drag Malaysia's 2023 external trade.
Maybank Investment Bank said in a note that it forecasts slower 2023 exports and imports growth of 4 percent and 6 percent respectively for Malaysia as it expects global real gross domestic product growth to slump this year amid stagnation or recession in major advanced economies.
"Keeping this year's external trade in the slow growth territory is the expected firmer growth of China, which is expected to benefit bilateral trade, as well as the mixed outlook for the average prices of major export commodities," said the research house.
Meanwhile, UOB Global Economics and Market Research said in a note that it expects Malaysia's export growth to dip significantly to 1.5 percent from a double-digit growth of 25 percent in 2022.
It mainly takes into consideration the statistical base effects (after two consecutive years of robust gain in 2021-2022), softening global demand, ongoing global tech down cycle, exporters' capacity in meeting environmental, social, and governance market demand, and expectations for lower export earnings in light of stabilizing commodity prices.
People wearing face masks walk on a street in Kuala Lumpur, Malaysia, May 22, 2021. (Photo by Chong Voon Chung/Xinhua)
Hong Leong Investment Bank Research also said that global demand for goods and services is anticipated to further deteriorate this year as recessionary risks continue to darken the outlook of some of the largest world economies, particularly the United States and European Union, risking Malaysia's trade performance.
Nevertheless, it said China's recent reopening and pent-up demand is expected to support trade activity, providing support for commodities, which will then benefit energy and commodity exporters like Malaysia.
Taking into account the high base from the strong expansion last year, MIDF Research said in a note that it projects Malaysia's export and import growth to moderate to 9.2 percent and 9.5 percent from 25 percent and 31.3 percent, respectively, in 2022.
The research house expects continued rise in demand for electrical and electronic products and commodities to continue driving Malaysia's exports.
It said sustained rise in domestic spending and business activities will support the import outlook going forward.
It also anticipated positive effect on exports from the ratification of trade agreements such as the Regional Comprehensive Economic Partnership and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Nevertheless, it cautioned on the possible drag to global trade and production activities given the expected slowdown in global growth, particularly in the advanced economies.
It also said the escalation of geo-political tension, trade war and renewed pressure on the global supply chain could also negatively affect trade outlook.
However, it expects the reopening of China's economy will help to boost global growth outlook and contribute to improved external demand from within Asia.
People wearing face masks walk on a street in Kuala Lumpur, Malaysia, Sept. 15, 2021. (Photo by Chong Voon Chung/Xinhua)
Affin Hwang Investment Bank said it believes the heightened global recession risk will likely cause stagnant global trade growth, which poses downside risks to Malaysia's overseas demand.
Despite slowing inflation in some major economies, it said inflationary pressures still remain elevated as compared to their respective inflation targets.
Thus, it expects the global financial condition will still be tightened further from interest rate hikes by central banks around the world in 2023.
Due to the base effect, the research house expects Malaysia's real exports and real imports of goods and services to record slower growth rates of 3.5 percent and 4.5 percent this year.
"With the balance of risks remaining tilted to the downside, we are expecting a further loss of momentum in Malaysia's external trade in 2023, mainly due to the uncertain external factors, but the country's domestic demand should remain healthy," it said. ■
