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Moody’s Analytics: Optimistic outlook for Malaysia’s trade, industrial production

Moody’s Analytics: Optimistic outlook for Malaysia’s trade, industrial production

06 May 2021

Malaysia’s trade and industrial production both paint an optimistic outlook on the nation’s economy but the reimposition of the Movement Control Order (MCO) may threaten its road to recovery, said Moody’s Analytics.

Associate economist Sonia Zhu said Malaysia’s industrial production upswing was a combination of both low base effect from last year as well as the growing demand in manufacturing goods.

The industrial production rose 9.3% year-on-year (y-o-y) in March 2021, and was up 1.5% from the previous month, she said in a note today.

“The growth in manufacturing sector output was in line with the burgeoning manufacturing sales growth in Malaysia with the nation’s stellar March export performance contributing to the strong growth in export-oriented manufacturing industries.

“Compared with the previous month, the manufacturing production index rose from 120.12 to 128.28,” said Zhu.

She added that the manufacturing sector output remained the bright spot in Malaysia’s industrial production as it increased by 12.7% y-o-y, the highest growth rate since September 2017.

The resurgence of Covid-19 infections in the Asia-Pacific region has led to a ramp-up in rubber and plastic production by 14.1% y-o-y and this translates to a 6.3% increase month-on-month (m-o-m), she said.

Zhu also noted that food, beverage and tobacco output increased ahead of the Ramadan festive period in April, while electrical and electronic products continued to increase at a double-digit growth rate due to strong global demand in semiconductors used in 5G technology, high-performance computing and automobiles.

However, she said the mining sector continued to contract in March as a result of falling crude oil and condensate index.

The increase in the natural gas index (4.3%) was insufficient to offset the decrease in crude oil index (-9.4%), she said, resulting in an overall decline in the mining sector output.

As for the electricity sector output, Zhu noted that it increased 10.3% y-o-y, following a 5.8% decrease in February 2021, resulting in a surge of 16.2% m-o-m.

“While both trade and industrial production performed better than expected, downside risks remained elevated.

“This is attributed to the government’s recent MCO announcement in major cities in Malaysia, including Kuala Lumpur and Johor Bahru, due to rising Covid-19 infections,” she added.

Source: The Edge Markets