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BUSINESS

Malaysia's IPI growth outlook seen mixed as global economic uncertainty deepens

12/09/2022 11:57 AM

By Zarul Effendi Razali

KUALA LUMPUR, Sept 12 (Bernama) -- Malaysia’s Industrial Production Index (IPI) is expected to remain favourable for the year (5.0 per cent), underpinned by sustained improvements in domestic spending and steady external demand, although that is expected to gradually moderate going forward.

Public Investment Bank Bhd said electrical and electronics (E&E), as well as the exports of other manufactured goods, will remain encouraging nonetheless. 

"Electricity output will also be a notable contributor to IPI growth in 2022, thanks to full economic openings following our transition to the COVID-19 endemic stage beginning April. 

"Risks may emanate from inflationary pressures and more pronounced economic slowdowns in the advanced economies, though we expect the former to gradually dissipate and see the latter not an immediate threat in the near term," it said in a note.

However, MIDF Research has revised its projection for IPI growth lower to 6.0 per cent this year compared to 8.2 per cent in the previous year, as it now anticipates a more moderate IPI growth in the latter part of the year. 

"While Malaysia’s manufacturing purchasing managers index (PMI) remained above 50 at 50.3 in August (July: 50.6), the slowdown in the global economy in August, as shown by the latest PMI report, suggests a softer outlook for external demand. 

"Moreover, a slowing sales performance in July also signals moderate growth in domestic spending. In other words, while we expect IPI to continue growing, the near-term outlook would be constrained by possible softening of final demand, in addition to challenges in the global supply chain and increased production costs," it said in a separate note. 

Overall, the research firm foresees continued expansion in domestic economic activities.

"Despite signs of a more moderate outlook, we still expect increased foreign demand especially for E&E and commodities to drive production in the export-oriented sectors," it said.

AmBank Research said moving forward, it sees “more pronounced headwinds as global central banks (have) already tightened their purse strings in an effort to bring down inflation, which in turn will dampen global demand and cause spillover effects on export-oriented industries.” 

"Plus, the intermittent lockdowns in China due to the stringent zero-Covid policy, to some extent, can affect the industry’s performance as well. The downside risks also lie in the escalation of geopolitical tension between China-Taiwan. 

"The easing semiconductor sales can also pose some threat to Malaysia’s growth activity. For July 2022, the global semiconductor revenue increased 7.3 per cent year on year to US$49 billion, the slowest pace since Dec 2020.

“For now, we are maintaining our full-year growth projection at 6.4 per cent in 2022 before easing to 4.8 per cent in 2023," it said.

-- BERNAMA

 

 


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