Trade in Malaysia is anticipated to rebound in 2021, investment banks say.

KUALA LUMPUR— Malaysia’s trade, backed by a recovery in global demand, especially for agricultural and manufactured goods, is expected to recover in 2021 as Covid-19 threats recede following a massive global vaccination program.

Public Investment Bank Bhd (PIVB) said in its Economic Update today that, in the midst of a pandemic that increased demand for devices such as computers and tablets for home-based work and learning, there would also be sustained global demand for information technology products.

In turn, it said, a global 5G network transition by 2025 will underpin an increase in demand for 5G-enabled products.

However, PIVB claimed that trade could continue to be weighed down by a steep reduction in production by the Organization of Petroleum Exporting Countries (OPEC) and its oil-producing allies (OPEC+) until at least the second quarter of 2021, and by economic difficulties in advanced and major economies due to the headwinds of Covid-19, especially during the first half of this year.

A revival in new domestic Covid-19 cases that could force customers to remain cautious and continue preserving resources, as well as the confusion created by the second US-China trade talks, which may start earlier this quarter, are other potential hampering factors.

The bank noted many positive economic indicators, including a trade surplus in December 2020. “It (the surplus) remained impressive after rising to RM20.7 billion in December 2020 by 64.9 percent year-on-year, pushing the full-year surplus to RM184.7 billion, the highest on record, compared to RM146 billion in 2019,” it said.

It added that trade surpluses, powered by complete economic openings across Asean and China as well as nascent global economic recovery due to rapid Covid-10 vaccination programs, could remain sanguine in 2021.

This might, however, be offset by the anticipated turnaround in imports, as well as the uncertainty and risks emerging from the second US-China trade agreement, it said.

In its note, Maybank IB Study, meanwhile, echoed the view of a global economic recovery that would improve the commercial output of Malaysia.

It reported that both exports and imports are projected to recover by 6.0% and 7.0% respectively, with a trade surplus of RM187.8 billion in 2021.