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Malaysia's Ministry of International Trade and Industry recently released data showing that in 2022, Malaysia's import and export trade volume increased by 27.8% year on year to 2.849 trillion ringgit (about 663.9 billion US dollars), staying above 2 trillion ringgit for two consecutive years, the fastest growth year since 1994.

Malaysia recorded record levels of total trade, imports, exports and trade surplus in 2022, reflecting strong trade growth on the back of strong external demand and higher commodity prices. Full-year exports rose 25% to 1.552 trillion ringgit. Imports also crossed the 1 trillion ringgit mark for the first time to 1.297 trillion ringgit, up 31.3 per cent year-on-year. The trade surplus rose 0.6 per cent to 255.1 billion ringgit, marking the 25th consecutive year of surplus since 1998.

In terms of major markets, Malaysia's exports to ASEAN, China, the United States, the European Union and Japan all hit record highs, while exports to Egypt, Sri Lanka, Mozambique, Papua New Guinea, Togo, Djibouti and Afghanistan also increased significantly. Meanwhile, trade with members of the Regional Comprehensive Economic Partnership (RCEP) registered double-digit growth in December. The strong performance of Malaysia's import and export trade has laid a solid foundation for the country's full-year GDP growth of around 8%, which is likely to exceed expectations.

On the export side, exports of manufactured goods, agricultural products and minerals all registered double-digit growth. The strong export growth was mainly attributable to double-digit growth in electronics and appliances, crude oil, liquefied natural gas, petroleum products, palm oil, palm-based agricultural products and machinery, equipment and parts, with exports each exceeding ringgit 10 billion.

On the import side, three categories stood out: first, the demand for domestic fuel and lubricants consumption increased, resulting in the import of semi-finished goods, which accounted for 54.4% of the total import value, rising 29.3% to 705.74 billion ringgit; Second, there were large imports of non-transport capital goods, which contributed to a 15.9% increase in imports of capital property goods to 12.032 billion ringgit, accounting for 9.3% of the total imports; Third, imports of processed food and beverages increased, resulting in a 24 percent jump in imports of consumer goods, which accounted for 8 percent of total imports, to 104.13 billion ringgit.

Exports had a good December. Exports rose 6 per cent year on year to 131.89 billion ringgit, a single-month high for December, driven by strong exports of manufactured goods, petroleum products, electronic and electrical products and liquefied natural gas. Exports of manufactured goods, which accounted for 83.7% of total exports, rose 4.6% to 110.39 billion ringgit; Exports of petroleum products and electronic and electrical products both increased by more than 1 billion ringgit; Minerals, which accounted for 7.4 per cent of total exports, grew 31.6 per cent year-on-year to 9.74 billion ringgit, the 21st consecutive month of growth, driven by LNG.

It is worth mentioning that China has been Malaysia's largest trading country for 14 consecutive years in 2022. Trade with China, which accounts for about 17.1% of Malaysia's total trade volume, rose 15.6% year on year to 487.13 billion ringgit. Malaysia's exports to China exceeded the ringgit 200bn mark for the first time last year, up 9.4 per cent from a year earlier. China is also Malaysia's largest import market. Imports from China account for about 21.3 per cent of Malaysia's total imports. Imports from China rose 20.7 per cent to 276.5 billion ringgit for the year, led by electronic and electrical products, machinery equipment and parts, and chemicals and chemical products.

Apart from this, Malaysia's total trade with ASEAN rose 34 per cent to 772 billion ringgit, accounting for 27.1 per cent of all trade, with exports to Asean up 31.8 per cent to 452.9 billion ringgit and imports up 37.1 per cent to 319.1 billion ringgit. Bilateral trade between the United States and Malaysia, which accounted for 9.4% of Malaysia's total trade, increased 23.3% year on year to 267.59 billion ringgit.

Looking through 2023, multiple factors and uncertainties will put significant downward pressure on Malaysia's import and export trade.

The global economic recovery faces multiple headwinds. Geopolitical tensions have yet to ease. Risks such as trade decoupling, disruptions in global supply chains and fluctuations in commodity prices remain. The global economic downturn has reduced external demand and slowed demand for electronic and electrical products. In addition, domestic demand, inflation, monetary policy and other factors will affect the growth of trade.

Second, the global trade situation is more serious. The World Trade Organization predicts that global trade will grow by 1 percent in 2023. Wto Director-General Joaquin Iweala said at the Davos Forum that trade in goods is expected to grow by only 1 percent this year, much lower than last year's 3.5 percent.

Third, Malaysia's manufacturing sector contracted. Malaysia's manufacturing purchasing managers' Index (PMI) continued to fall to 47.8 in December from 47.9 in November, and has remained below the 50-point line of expansion and contraction since September, which will have a significant negative impact on import and export trade.

Fourth, the export power weakened and showed a downward trend. Malaysia's export growth slowed to 6 percent in December last year, ending a streak of 16 consecutive months of double-digit growth, despite 25 percent year-on-year growth in 2022.

Malaysia's trade outlook is expected to stabilize in 2023 compared to the explosive growth in 2022. Malaysia's Ministry of International Trade and Industry expects the volume of imports and exports to grow at a slower pace in 2023. According to the analysis of the 2023 Economic Report by the Ministry of Finance, the annual volume of imports and exports is estimated to grow by 1.3%, with exports growing by 2.2% and imports growing by 0.2%.