Malaysia: Cautious exports outlook with strong surplus – UOB

UOB’s Global Economics & Markets Research, led by Julia Goh and Loke Siew Ting, highlights that Malaysia’s exports surged in April, driven by robust E&E demand and record re-exports, widening the trade surplus. However, the team maintains a cautious view, keeping its 2026 export growth forecast at 2.5% as geopolitical risks, Middle East supply disruptions and potential US tariff measures cloud the outlook.

Exports surge but outlook stays cautious

"Apr’s strong export performance appears exceptional, reflecting swift business responses to distortions from the prolonged Middle East conflict and closure of Strait of Hormuz. Nonetheless, geopolitical risks remain elevated, with rising possibility of renewed US–Israel action on Iran and potential re-emergence of US tariff risks after the end of the investigation under the Section 122 and the expiry of temporary 10% global tariff in Jul. Against this backdrop, we maintain a cautious outlook and our 2026 export growth forecast at 2.5% for now (BNM est: +8.6%; 2025: +6.4%), despite strong year-to-date growth of 19.0% as of Apr."

"This strong goods trade surplus, alongside an expected, sustained services surplus, raises the likelihood of an upside surprise in the current account surplus this year (UOB est: +MYR38.0bn; BNM est: +MYR45.6bn; 1Q26 actual: +MYR15.2bn), barring unforeseen shifts in global or domestic economic conditions. We will reassess our forecast when greater clarity emerges on the Middle East conflict and related developments."

"The Malaysian government has warned this month (May) that manufacturers may face production stoppages as early as Jun due to supply disruptions from the Middle East conflict while inventories are increasingly depleted. Although firms are sourcing alternatives, substitutes may be delayed or fail to meet required specifications."

"Nonetheless, geopolitical tensions may re-escalate, with increasing risk of renewed US–Israel action on Iran and a potential return of US tariff measures following the July expiry of Section 122 provisions and the temporary 10% global tariff. US President Trump warned on Tue (19 May) that “we may have to give them another big hit” if Iran fails to agree to US terms within days, underscoring heightened risk despite his earlier decision to call off planned military action since a truce was agreed to on 8 Apr."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)