KUALA LUMPUR: Malaysia is moving to shield its export sector from escalating geopolitical tensions and global trade disruptions, even as first-quarter performance remained resilient.
Malaysia External Trade Development Corporation (Matrade) said exports rose 12.7% year-on-year to RM426.53 billion in Q1 2026, outpacing import growth of 7.7%, while the trade surplus surged 54% to RM63.22 billion.
Matrade chairman Datuk Seri Reezal Merican Naina Merican said the strong performance was driven largely by electrical and electronics (E&E), alongside optics, scientific equipment and medical devices, supported by global demand for semiconductors and artificial intelligence-related technologies.
“Export is the most important for us, we are mandated to look into external trade,” he said, adding that Malaysia is shifting from reacting to crises towards proactive facilitation.
Reezal was speaking at Matrade’s update on Malaysia’s trade performance in the first quarter of 2026 today.
Despite the upbeat start, Matrade warned that underlying pressures are building, with 90.5% of manufacturers already affected by global disruptions, particularly rising logistics costs and raw material shortages. The full impact is expected to be felt from the second quarter onwards.
Operating costs have risen between 10% and 30% for more than half of businesses, driven by supply chain disruptions, higher freight charges and limited access to raw materials.
To cushion the impact, Matrade has rolled out a strategic mitigation plan centred on diversification and real-time trade intelligence.
Reezal said Malaysia is pursuing a two-pronged diversification strategy, expanding export destinations while reducing reliance on single sourcing markets.
This has led to a surge in trade with non-traditional and emerging markets, particularly in Africa, Central Asia and South America, as exporters shift focus away from conflict-prone regions.
“We give more concentration to non-conflict zones,” he said, noting that regions such as Africa and Central Asia recorded a combined growth of 13.2%.
Exports to several emerging markets have risen sharply, including Sudan, Uganda and Bangladesh, reflecting a broader push to tap new demand centres.
At the same time, Malaysia is strengthening trade ties within existing frameworks, with exports to free trade agreement partners growing 10.4% over recent years.
Asean remains a key pillar, accounting for about 25% of Malaysia’s total trade, with stronger growth now seen in newer markets such as Cambodia and Myanmar.
However, exposure to conflict-affected regions remains limited. Trade with West Asia accounts for just 2.7% of total trade, although sectors such as palm oil, petroleum and jewellery are already seeing some contraction.
Reezal said geopolitical tensions are also creating new opportunities, as supply gaps emerge in certain markets.
“Every crisis, there are opportunities for us,” he said, pointing to shifts in sourcing patterns and consumer preferences in affected regions.
To respond faster, Matrade has transformed its 47 overseas offices into “frontline intelligence hubs” tasked with monitoring trade flows and identifying disruptions in real time.
These offices now focus on market access, competitiveness and supply chain enablers, including identifying alternative ports and logistics routes to bypass chokepoints such as the Red Sea.
The agency has also launched an artificial intelligence-powered tool, the Matrade Interactive Virtual Assistant, to provide exporters with round-the-clock support and market insights.
Alongside this, several task forces have been established to coordinate responses, including a Trade Resilience Taskforce involving industry groups such as the Federation of Malaysian Manufacturers and the National Chamber of Commerce and Industry Malaysia.
Matrade CEO Abu Bakar Yusof said Malaysia remains committed to sustaining export growth despite global uncertainties, noting that the country improved its global export ranking to 23rd last year.
“We are not looking back, we will continue to push our exports and sustain growth,” he said.
For 2026, Matrade is projecting a modest trade and export growth of between 3% and 5%, although this outlook is subject to downside risks.
Reezal cautioned that a prolonged escalation in geopolitical tensions could trigger a broader global slowdown.
“If it escalates into a global recession, it will affect all countries and impact demand for our exports,” he said.
Small and medium enterprises, which account for about 15% of exports, remain a key concern, particularly due to working capital constraints amid rising costs and delayed payments.
While government grants and export promotion programmes are in place, Reezal said liquidity remains a critical issue that could disrupt production and export capacity.
Looking ahead, Matrade is seeking to diversify Malaysia’s export base beyond E&E, with a stronger focus on high-growth sectors such as pharmaceuticals, medical devices and halal products.
“E&E is still dominant, but we want to develop other sectors that can contribute meaningfully to exports,” he said.
