KUALA LUMPUR: External demand and business sentiment will likely stay muted amid lingering uncertainty over the US tariff and foreign trade policies, according to UOB Global Economics and Markets Research.
UOB said Malaysia’s export growth fell short of expectations in August, reflecting persistent headwinds in global trade.
Gross exports moderated sharply to 1.9 per cent year-on-year last month from 6.5 per cent in July, well below UOB’s forecast of 4.5 per cent.
The slowdown was largely driven by weaker shipments of electrical and electronics (E&E) products, together with contractions in crude oil, petroleum-related goods and chemicals, which offset a rebound in agricultural exports.
“Gross imports also disappointed with a 5.9 per cent contraction in August. It marked the first fall in five months and the biggest drop in nearly two years,” it said.
This was due to continued declines in intermediate goods (-16.8 per cent) and consumption goods (-8.9 per cent), alongside slower growth in capital goods imports (+11.0 per cent).
With imports falling at a faster pace than exports, Malaysia’s trade surplus widened to RM16.1 billion in August from RM14.6 billion in July.
“The past two months’ export data reflect a shift in Malaysia’s key export markets that is in tandem with shifting global trade conditions, and a continuation of bumpy performance due to prolonged tariff uncertainties,” UOB said.
It cautioned that Malaysia’s trade performance will likely remain uneven through the rest of 2025 and into 2026, particularly with heightened uncertainty over US trade actions.
UOB said Malaysia’s near-term trade outlook hinges on the pending announcement of US sector-specific tariffs under Section 232 and curbs on artificial intelligence shipments, following the reciprocal tariffs that took effect on August 8.
The outcome of US-China trade talks by mid-November will also be closely watched.
“Domestic factors such as the government’s fiscal reforms including RON95 petrol subsidy retargeting and the rollout of e-invoicing could also weigh on business sentiment in the near term,” it added.
Despite the weak August numbers, UOB maintained its full-year export growth forecast for 2025 at 3.8 per cent.
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