Domestic manufacturing activity forecast to remain stable - MIDA | Malaysian Investment Development Authority
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Domestic manufacturing activity forecast to remain stable

Domestic manufacturing activity forecast to remain stable

14 Oct 2022

Hong Leong Investment Bank (HLIB) expects production by Malaysia’s domestic-oriented manufacturing industries to remain relatively stable, backed by the ongoing recovery in the labour market.

In a note yesterday, the investment bank said it was also maintaining its 2022 gross domestic product (GDP) forecast at 6.5% year-on-year (y-o-y).

Nevertheless, it noted that the global outlook darkened in September, as the global manufacturing purchasing managers’ index (PMI) dropped into contraction territory at 49.8 (August, 50) for the first time since June 2020.

“New orders and new export business declined at a faster pace, signalling a deterioration in the production trend in the upcoming months amid weaker global trade flows,” it said.

In a separate note, MIDF Research said it foresees the industrial production index (IPI) recording a more moderate growth due to the diminishing low base effect.

“Malaysia’s manufacturing PMI recently fell to 49.1 in September 2022 (August, 50.3) as local firms began to slow production and purchases on the back of softer demand,” it said.

MIDF Research noted that so far, Malaysia’s economy remained resilient as economic activities continued to increase, supported by domestic spending as well as sustained expansion in external demand.

“So, there may be an upside surprise to the IPI and growth outlook in the near term if demand from within and outside Malaysia continued to grow robustly.

“Nevertheless, as an open economy, we believe Malaysia will likely be impacted by any significant slowdown in international trade and global production activities,” it said.

Meanwhile, Kenanga Research said the manufacturing growth will likely be buoyed by stronger-than-expected domestic demand and surprisingly resilient external trade.

However, it said a slowdown is still expected towards the end of the fourth quarter of this year, as private consumption may start to lose momentum and external demand remains at risk amidst a potential global recession.

Source: Bernama