KUALA LUMPUR (Jan 28): UOB Group said on Friday Malaysia’s export value growth at 26% to a record high of RM1.2 trillion in 2021 is the highest growth quantum since 1998 but factors including high year-ago base effects and the Omicron variant of the SARS-CoV-2 virus, which causes the Covid-19 pandemic, may curtail the country's export gain to 2% in 2022.
"There are ongoing challenges clouding the trade outlook including dealing with the Omicron and potential new virus variants, supply-chain bottlenecks, slowing China economy, and tighter global financial conditions.
"Furthermore, high year-ago base effects and resource constraints amid domestic worker shortages and high-cost pressures could curtail export gains to 2% this year (2022),” UOB economists Julia Goh and Loke Siew Ting wrote in a note on Friday (Jan 28).
Malaysia’s export value grew 26% to a record high of RM1.2 trillion in 2021 from a year earlier as the country’s December figure expanded 29.2% to RM123.8 billion, led by the sale of electrical and electronics products to major importers like China, the US and Singapore, according to the Department of Statistics Malaysia (DOSM) on Friday.
In a statement, the DOSM noted that the nation’s cumulative import value increased 23.3% to RM987.2 billion in 2021.
"Malaysia’s trade surplus widened by 37.7% from RM183.3 billion in the preceding year to RM252.6 billion, the highest trade surplus ever recorded. This was the 24th consecutive year of a trade surplus since 1998,” the DOSM said.
In the UOB note, Goh and Loke said Malaysia’s 2021 import value growth at 23.3% is the highest since 2004.
"This brought trade surplus to an all-time high of RM252.6 billion in 2021,” they said.
Meanwhile, J.P. Morgan economist Nur Raisah Rasid wrote in a note on Friday that J.P. Morgan expects Malaysia’s monetary policy normalisation to begin in the third quarter of 2022 (3Q22).
Nur Raisah said in the note, which was issued in response to Malaysia’s latest external trade data announcement, that while the emergence of the Omicron variant in Malaysia could raise near-term uncertainties, J.P. Morgan is maintaining its current forecast for the country’s overnight policy rate (OPR) at this juncture as the country’s high Covid-19 vaccination rates may imply a higher tolerance for future pandemic outbreaks, hence reducing the need for broad-mobility restrictions to curb the spread of the pandemic.
"Looking ahead, we expect labour conditions outside the goods-producing sectors to catch up next year (2023) alongside the broader resumption in services, in turn, guiding core prices higher, albeit at a gradual pace.
"Thus, we continue to expect monetary policy tightening of 25 [basis points in the OPR] each in 3Q22 and 4Q22,” she said.
On Jan 20, 2022, Bank Negara Malaysia (BNM) said in a statement that the central bank’s Monetary Policy Committee decided to maintain the OPR at 1.75%.
The OPR at 1.75% is the lowest on record, according to BNM data, which dates back to 2004 on the central bank’s website.
According to BNM, the OPR has been maintained at 1.75% since July 7, 2020, when BNM cut the rate from 2%.
The OPR rose to its highest on record at 3.5% on April 26, 2006, when the central bank raised the rate from 3.25%, BNM said.
The OPR was subsequently maintained at 3.5% until Oct 24, 2008, according to BNM data.