Malaysia: Cautious trade outlook with export risks – UOB

UOB economists Julia Goh and Loke Siew Ting notes that Malaysia’s export momentum softened in March but the trade surplus widened to a one-year high. Strong Electrical and Electronics (E&E) shipments and re-exports supported exports, while imports were driven by capital goods. They highlight geopolitical and cost risks and maintains its 2026 export growth forecast at 2.5%.

Exports slow but surplus strengthens

"As exports continued to outpace imports, the trade surplus widened to a one-year high of MYR24.6bn in Mar (Feb: +MYR16.7bn). Cumulatively, trade surplus amounted to MYR63.2bn in 1Q26 (4Q25: +MYR48.6bn), the largest since 1Q23. This stronger trade balance is expected to translate into a wider current account surplus of MYR15.0bn in 1Q26 (4Q25: +MYR2.0bn). Actual 1Q26 current account data will be released on 15 May, together with the 1Q26 final GDP figure."

"While the AI upcycle is expected to continue underpinning Malaysia’s trade prospect this year, renewed Middle East tensions—particularly the potential prolonged closure of the Strait of Hormuz—have heightened downside risks to global growth and demand. Higher input costs and supply chain disruptions across oil and non-oil materials may weigh on near-term exports and production despite easing US tariff concerns. We remain cautious and maintain our 2026 export growth forecast at 2.5% for now (BNM est: +8.6%; 2025: +6.4%)."

"In sum, any prolonged disruption to the Strait of Hormuz would adversely affect trade through higher cost, reduced volumes, and weaker business confidence. Elevated crude oil and shipping costs could inflate the import bill and offset export gains even if export volumes remain resilient. Limited cost pass-through amid softer demand and raw material constraints may prompt firms to adopt a more cautious stance in the near term. Hence, we keep our cautious view on Malaysia’s trade prosects, maintaining our 2026 full-year export growth forecast at 2.5% for now (BNM est: +8.6%; 2025: +6.4%)."

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