Malaysia’s export momentum saw a visible moderation in February, growing by 10.8% year-on-year (YoY). This follows a blistering 19.6% surge in January and fell short of market expectations, which had anticipated growth closer to 12.2%.
According to a research note by Kenanga Investment Bank (KIBB), the slowdown marks a shift after the country recorded its fastest expansion in 40 months at the start of the year. On a month-on-month (MoM) basis, exports declined by 10.8%, marking the second consecutive month of contraction.
The Electrical and Electronic (E&E) sector continues to be the backbone of Malaysian trade, though its growth slowed to 28.5% in February compared to nearly 40% in January. The export value of E&E products dropped to RM60.8 billion, now accounting for 46.4% of total exports.
Commodity-linked sectors struggled during the month, Palm Oil: Contracted by 13.7%, LNG: Dropped sharply by 27.3% while Mining: Provided a silver lining, expanding by 12.3%, bucking the general downward trend in commodities.
Kenanga also noted that the February data revealed a stark contrast in performance across Malaysia’s major trading partner. Demand remained a pillar of support. Exports to the US surged 42.3%, marking three straight months of double-digit growth. Shipments to the EU also grew by a healthy 33.9%.
As for Asia, performance was significantly weaker. Exports to Singapore plummeted 17.1% to a nine-month low, while shipments to Japan extended their decline for a fourth month (-14.8%). Demand from China also moderated to 13.2%.
While the data showed exports slowing, imports accelerated to 8.2% YoY, driven by a rebound in capital and intermediate goods. This suggests that despite the export lull, Malaysian businesses are still investing in machinery and raw materials for future production.
However, the mismatch between export moderation and import acceleration caused the trade surplus to narrow to RM16.7 billion, down from RM22.0 billion in January.
Kenanga maintains its 2026 export growth forecast at 5.1% and GDP growth forecast at 4.5%. The investment bank remains optimistic about the semiconductor ecosystem, noting the Semiconductor Industry Association’s (SIA) projection that global sales could hit a record USD 1.0 trillion this year.
“E&E demand is expected to stay resilient, driven by AI, 5G/6G infrastructure, and EV components,” Kenanga noted.
Despite the positive long-term outlook for tech, the report warned of significant “cloudiness” on the horizon. Key risks include geopolitical Tensions: Specifically the escalating strikes involving the US, Israel, and Iran.
On Trade Policy the ongoing uncertainty regarding US trade stances is also a concern. Malaysia has yet to respond on the ART deal with speculation floating that it has been cancelled.
The other major trading partner of Malaysia, China’s erratic economic rebound continues to weigh on regional trade.
Kenanga says for the the immediate future, the country’s economy is expected to be supported by festive spending during the long Hari Raya weekend and the ongoing Visit Malaysia 2026 campaign.
Source: Business Today
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<p>Time: November 2025<br /> By: WTO and International Trade Group, Legal Department – VCCI</p>
