Manufacturing Sector To Benefit From Robust Investment -- RHB IB

KUALA LUMPUR, Feb 7 (Bernama) -- Malaysia’s manufacturing sector is well-positioned to benefit from robust investment activities and sustained external demand, RHB Investment Bank Bhd (RHB IB) said.

However, in a note today, the bank expressed caution over the potential impact of protectionist policies under the new United States (US) administration, which could affect trade performance and the manufacturing sector in 2025.

“The manufacturing sector in Malaysia is expected to be supported by the resilience of export-oriented industries and trade performance, provided our base case for positive global economic prospects materialises.

“This trend is further reinforced by continued strength in the global technology cycle and significant growth in global semiconductor sales,” it said.

For 2025, it said global semiconductor sales are projected to grow by 11.2 per cent, following an estimated growth of 19 per cent in 2024.

"On the downside, we remain wary of potential negative implications for Malaysia’s trade and manufacturing outlook amid rising protectionism and escalating trade tensions among major economies," it said

According to the bank, the growth and export outlook remains uncertain due to potential shifts in tariff policies and their impact on global supply chains and inflation.

While Malaysia's export sectors are unlikely to be directly affected by US protectionism, given the country’s low trade deficit with the US, the indirect impact—through major trade partners such as China and a potential slowdown in regional demand, could be substantial, especially in the electronics and electrical (E&E) sector, RHB IB said.

“A return to protectionist policies could heighten US-China tensions, affecting Malaysia's role in China-centric supply chains.

"To mitigate risks, Malaysia may strengthen ties with trade blocs like the Regional Comprehensive Economic Partnership, BRICS, and ASEAN, while its domestic economic strength could help buffer external shocks," it said.

In the medium term, Malaysia could benefit from China’s efforts to reroute its manufacturing and export operations, given its significant role as an E&E exporter, the bank added.

-- BERNAMA