Ongoing recovery China to lift Malaysia’s industrial production: Moody’s
14 Dec 2020
The ongoing recovery in Chinaʼs production will help moderate the decline in Malaysiaʼs industrial production in the near future, Moody’s Analytics economist Denise Cheok said.
In a note today, she said Malaysia has managed to pass its 2021 budget through parliament, which will likely guarantee further fiscal support into next year.
“Although it will still need to be debated at the committee stage, the possibility of defeat in this second stage is slim,” she said.
This is despite Malaysia posted a 0.5 per cent year-on-year decline in industrial production for October, breaking a three-month streak of growth.
Cheok said although manufacturing and electricity rose in yearly terms, the slump in mining weighed down the overall index.
“The combination of low oil prices and weak global demand amid lockdowns in Europe and the US impacted both industrial production and exports for Malaysia, which is a net exporter of oil.
“Manufacturing held up well, with gains in the core electronics products.
“Transport equipment has also increased on a yearly basis, despite the ongoing travel restrictions,” she said.
Nonetheless, IHS Markit Malaysia Manufacturing Purchasing Managers’ Index (PMI) fell in November for the h consecutive month to 48.4, down from 48.5 in October.
Cheok said a reading of less than 50 indicates a contraction of the manufacturing sector.
“The second wave of Covid-19 cases in Malaysia caused a partial lockdown to be reinstated in most of the country, including the Klang Valley, the economic centre of the country.
“Although the restrictions are less severe than those imposed at the beginning of the year, the additional hit to consumer and investment sentiment will compound the effects.
“Heightened Covid-19 restrictions in major trade partners have disrupted supply chains of imported materials and dampened external demand for Malaysian exports.
“Production and volumes of new orders fell in November, while costs continued to rise because of the increased prices of raw materials,” she said.