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MIDF Research: Malaysia's IPI to grow further this year

11/05/2022 12:00 PM

KUALA LUMPUR, May 11 (Bernama) -- MIDF Amanah Investment Bank Bhd (MIDF Research) expects Malaysia’s industrial production index (IPI) to remain on a growth trajectory this year, as businesses increase their production activities to cope with growing demand.

The brokerage firm said the demand outlook is better this year, given the stronger economic growth in light of the further reopening of the economy, growing domestic spending and robust external demand.

“Nevertheless, the near-term production outlook will be subject to downside risks from external developments, particularly the Russia-Ukraine conflict and extended lockdowns in China.

“In other words, business activities may be impacted by the challenges from prolonged disruptions in the global supply chain and rising production costs due to high commodity prices,” it said in a research note today.

It noted that Malaysia’s manufacturing Purchasing Managers’ Index fell to 49.6 in March this year from 50.9 in February, signalling that the country’s manufacturing growth had moderated as businesses were impacted by supply disruptions such as delayed shipments and shortages of materials and containers.

For the full-year 2022, MIDF Research maintained its forecast for IPI growth at +4.3 per cent. 

Meanwhile, Moody’s Analytics economist Denise Cheok said the latest industrial production reading confirmed the positive outlook for Malaysia’s first-quarter gross domestic product (GDP) data due this Friday. 

“With global trends moving in Malaysia’s favour, the country posted robust export growth in the opening months of the year.

“Domestic demand, which makes up 60 per cent of the GDP, is also expected to see a lift from the winding up of COVID-19 restrictions,” she said in an analysis titled “Malaysia's Industrial Output Marches On” released today.

Cheok added that the Russian invasion of Ukraine and a slowdown in Chinese growth remain downside risks, nevertheless, Moody’s Analytics remained cautiously optimistic about Malaysia’s growth in the coming months.

Meanwhile, AmBank has maintained its overall GDP growth forecast for 2022 at 5.6 per cent.

“Growth will continue to be supported by the elevated inflow of foreign direct investment, higher vaccination and booster rates, the reopening of international borders, a manufacturing upswing -- especially in the electrical and electronics subsector -- and strong external trade.

“Downside risks remain mainly from the external front, including higher commodity prices that will spill over through business costs and consumer prices, a potential new COVID-19 variant, prolonged supply chain-related issues, and extended global geopolitical conflicts,” it added. 




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