The unstable recovery in the US and pounding debt issues in Europe will impact the export performance of Malaysia.
Malaysia's total trade, which bounced back last year from a lashing global economic crisis, is projected to grow at a moderate five per cent in 2011, International Trade and Industry Minister Datuk Seri Mustapa Mohamad said.
Uncertainties in the global economy, from the unstable recovery in the US and pounding debt issues in Europe, will impact the export performance of a small trading nation like Malaysia.
Mustapa, however, said Malaysia's exports are well diversified and this will be a cushion against these global uncertainties.
The global economy is expected to grow at a slower pace at 4.2 per cent from 4.8 per cent last year.
"2011 will see Malaysia pursuing opportunities in fast-growing markets, namely China, India and West Asia.
"These markets have shown promising growth in the past five years. New markets such as Africa, Central Asia, Eastern Europe and South America will be explored to capitalise on the rising purchasing power of consumers in the region," Mustapa told the Business Times in an interview.
Growth to Malaysia's external trade in 2011, he said, was also expected to emanate from the free trade agreements that Malaysia had concluded such as with Japan, Pakistan, Chile and New Zealand and regional Asean agreements with China, Japan, Korea, India and Australia-New Zealand.
Manufacturing will continue to be the leading sector with electrical and electronic products as the largest contributor to total exports, accounting for about 40 per cent.
Other major export products include crude and refined petroleum, LNG (liquefied natural gas), palm oil, chemicals and chemical products as well as machinery appliances and parts.
While exports of merchandise remains a significant contributor to foreign exchange earnings, the services sector has been picking up, enjoying a surplus growth since 2007 except for 2009.
"It has great potential to further boost and diversify Malaysia's trade, especially from sectors such as healthcare, education, outsourcing services in manufacturing and information and communication technology (ICT), construction, engineering services, and services for oil and gas, Mustapa noted.
On 2010's trade performance, he said total trade should match that of 2008. Already total trade in the first 11 months had surpassed the RM1 trillion mark, with a value of RM1.064 trillion.
During the period, exports had enjoyed a robust growth pace of 16.8 per cent to RM582.26 billion while imports grew by 22.8 per cent to RM481.72 billion, leading to a RM100.55 billion surplus.
"It's also important to note that the ringgit's appreciation against the US dollar by 10 per cent during the year would have an impact on total trade in ringgit terms," he added.
Exports of commodity products such as crude rubber, crude petroleum, LNG and palm oil had recorded growth of 110.6 per cent, 28.5 per cent, 24.8 per cent and 23.9 per cent respectively.
The 29.1 per cent jump in exports of these four products in 2010 are expected to play an important role in export growth in 2011.
Mustapa pointed out that in 2010, all of Malaysia's top 10 export markets had recorded double-digit growth except for the US market, which had increased slightly by 1.1 per cent.
"As we can see, higher growth was recorded in the Asian markets, which reflected better growth performance in these countries.
"The export growth shown in Malaysia's major markets signal some indication of global recovery but at a slower pace," he added.