Malaysia’s trade outlook brightens with global growth upgrade

The recent upgrade in the global economic growth forecast for this year is expected to have a positive impact on Malaysia’s trade performance, according to Investment, Trade, and Industry Minister, Tengku Zafrul Abdul Aziz. The World Bank has increased its global growth projections to 2.1% in 2023, up from the 1.7% predicted in January. Additionally, the growth forecasts for the United States and China, Malaysia’s largest trading partners, have been raised to 1.1% and 5.6% respectively.

Malaysia’s gross domestic product (GDP) growth has also been revised upwards by 0.3 percentage points each, to 4.3% in 2023 and 4.2% in 2024. The Organisation for Economic Cooperation and Development (OECD) has also raised its growth outlook for the world economy to 2.7% from 2.6%, citing easing inflation and the lifting of China’s Covid-19 restrictions, but warned of a long road ahead to achieve strong growth.

“This upward revision should be positive for countries like Malaysia, whereby trade plays a major role in the economy. What we’ve seen is that the growth, trade is still positive, but compared to last year, there is a moderation in growth,” Tengku Zafrul told Bernama.

Trade currently accounts for around 140% of Malaysia’s GDP. The World Trade Organisation has predicted a lower trade growth rate of 1.7% this year, compared to 2.7% last year, before rebounding to 3.2% in 2024.

Despite the volatility in the currency market, Tengku Zafrul remains confident that Malaysia will not experience a trade deficit. He attributes this optimism to strong exports from the electrical and electronics (E&E) sector, which contributes approximately 6% to the country’s GDP.

“The sector continues to see strong global demand and we stand to benefit from this, and we stand to benefit from the realignment of the supply chain to Malaysia given the global geopolitical scene,” he noted.

Malaysia has maintained a trade surplus since May 2020. In 2022, the country’s total trade exceeded the RM2 trillion mark for the second consecutive year, reaching RM2.8 trillion. Exports amounted to RM1.6 trillion, while imports reached nearly RM1.3 trillion.