KUALA LUMPUR: Analysts are optimistic about the growth prospects for Malaysia’s industrial sector this year, despite a softer industrial production index (IPI) growth of 3.1% year-on-year recorded in February.
Although the IPI’s increase in February was modest, marking a slowdown from the 4.3% expansion recorded in January, it surpassed market expectations of a growth rate between 1.5% and 1.8% by a considerable margin.
Public Investment Bank Bhd in a note said that, however, external demand remains the primary risk factor influencing the Malaysian economy.
“While both the government and the central bank anticipate economic expansion within the range of 4-5% for the year, our outlook suggests a more conservative estimate of around 3.7%, contingent upon the magnitude of downside risks exerting notable influence,” it added.
On Monday, the Department of Statistics Malaysia said the moderation of February’s IPI was primarily attributed to the slower output growth in the manufacturing sector, which grew by 1.2% compared with 3.7% in January.
Kenanga Investment Bank Bhd said the manufacturing index forecast is retained at 4.6% in 2024 (2023: 0.7%), as the momentum may pick up pace in the second half of 2024.
“We continue to believe that the manufacturing condition will improve further towards the end of the year, mainly driven by the expected upswing in the technology cycle and China’s gradual recovery following a significant stimulus implemented by the country.
“Nevertheless, the manufacturing condition could experience a sluggish recovery in the near term, as reflected by the latest Manufacturing Purchasing Managers’ Index (PMI) reading, which fell to 48.4 in March (Feb: 49.5) and remained at a contraction level since August 2022,” it said in its Economic Viewpoint.
Its assumption is also based on the positive growth trajectory supported by higher demand from regional peers and better-than-anticipated performance among advanced economies.
“With that said, we project the first quarter of 2024 gross domestic product growth at 3.3% (Q4 2023: 3%) and maintain overall growth forecast at 4.5%-5.0% in 2024 (2023: 3.7%),” it said.
Meanwhile, Hong Leong Investment Bank Bhd said on the global front, the manufacturing PMI rose to 50.6 in March (February: 50.3), driven by strengthened new order inflows amid a broadening out-of-demand recovery from consumer goods to intermediate goods.
It said the demand increase was also aided by a near-stabilisation of global goods export orders, which observed the smallest decline in the ongoing 25-month trend of contraction.
“This signals further recovery for Malaysia’s manufacturing industry, coupled with support from continued domestic growth and the implementation of national masterplans,” it said in its Economics report. – Bernama
