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Industrial Production Index to recover in 2021, says economist

Industrial Production Index to recover in 2021, says economist

08 Feb 2021

KUALA LUMPUR, Feb 8 — Malaysia’s Industrial Production Index (IPI) is anticipated to recover this year in tandem with global economy improvement following the implementation of mass COVID-19 vaccination programmes.

The IPI, which a monthly economic indicator measuring real output in the manufacturing, mining, electricity, and gas industries, recorded a decline of 4.2 per cent year-on-year for 2020.

This comes on the back of weaker data from all indices, namely mining (-9.7 per cent), electricity (-3.7 per cent) and manufacturing (-2.7 per cent).

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the expected IPI recovery would allow economic activities to resume albeit cautiously given that the number of new infections remained at elevated levels.

“Additionally, the low base recorded last year means a slight improvement in production will result in positive growth. This is  a highly likely outcome,” he told Bernama.

He noted that the external environment looked favourable as the new United States administration under Joe Biden was committed to pumping the economy with generous amounts of scal injection.

He said the extra income from rising crude oil prices would also give the Malaysian government some leeway to introduce scal measures.

“Nonetheless, the situation is highly uid and it will all boil down to the successful and timely launch of vaccination programmes.

“The sooner the country reaches herd immunity, the quicker the economic recovery will be,” said Mohd Afzanizam.

According to him, the IPI growth by 1.7 per cent in December 2020 was better-than-expected against the consensus forecast of 1.0 per cent contraction, mainly on account of a 4.2 per cent expansion in the manufacturing sector from a 2.0 per cent growth in the preceding month.

He acknowledged that the  recovery momentum would be affected by the  restriction in human mobility and  strict adherence to the Health Ministry’s standard operating procedures.

“Interstate movement was allowed while more businesses had been fully operational in December. That helped improve economic activities alongside festivities and New Year celebrations.

“However, the same may not be said in the prevailing economic condition whereby the Movement Control Order has been reimplemented in almost all states,” he added.

Source: Bernama