KUALA LUMPUR, July 21 — The arrival of more foreign tourists in the second half of 2023 (2H 2023) is expected to help offset Malaysia’s weakened trade balance via larger inflows into the services account.

CGS-CIMB Sdn Bhd said it has maintained its current account surplus forecast for 2023 at 1.6 per cent of gross domestic product (GDP).

"Given China’s position as Malaysia’s largest trading partner, its economic recovery raises some concerns, with its weak second quarter 2023 (2Q 2023) GDP growth likely to act as a dampener to global demand as well as Malaysia’s exports.

"In terms of electrical and electronics (E&E) products, although Malaysia’s June exports showed some improvement year-on-year (y-o-y) in terms of value, we think shipments could remain soft in the quarters ahead,” it said in an Economics Update report today.

With global semiconductor sales still recording a double-digit contraction on a yearly basis in May, the stockbroking firm said demand normalisation in the E&E sector could be in the cards.

In a separate note, Hong Leong Investment Bank (HLIB) said the global demand for goods and services is anticipated to further deteriorate this year, likely due to the lagged impact of interest rate hikes and the increased global cost of living.

"Consequently, Malaysia’s trade performance is also anticipated to remain weak in the coming months due to high base effect and muted global demand conditions. We maintain our 2023 GDP forecast at 4.5 per cent y-o-y,” it said.

Meanwhile, Kenanga Research said the impact of the global economic slowdown and the diminishing lower base effect is expected to continue until September 2023, hence, maintaining a cautious outlook and exports forecast at -4.2 per cent for now.

"Despite weak exports in 2Q 2023, we still expect GDP growth to expand by 6.0 per cent (1Q 2023: 5.6 per cent) during the quarter, mainly due to resilient domestic demand, which is expected to take up the slack in the commodity-related and manufacturing export-oriented sectors. We maintain the overall 2023 GDP growth forecast at 4.7 per cent,” it said. — Bernama