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Malaysia’s industrial production will likely pick up in months ahead, economists say

Malaysia’s industrial output will likely pick up in months ahead, as better external demand boosts activity at its export-oriented factories, economists said, following a better – than – expected February print.

Industrial production index — which measures output from factories, power plants and mines — rose 3.1% in February from a year earlier, according to data published by the Department of Statistics Malaysia (DOSM) earlier on Monday. That compares to a Bloomberg poll of economists that had called for a 1.8% increase, and January’s 4.3% year – on – year growth.

The month-on-month contraction of 6.3% in February is likely due to shorter working days during the Lunar New Year break, RHB Investment Bank (RHB IB) said in a note, in reaction to the data’s release. “We observe an improving momentum in Malaysia’s industrial production year – to – date,” the house said.

Malaysia’s exports are expected to benefit from “a positive spillover effect” amid improved trade performance and manufacturing activities in major economies, RHB IB said. “We maintain our optimistic outlook for the global economy in 2024, whereby we expect continued economic recovery in key markets, such as the US, China and select ASEAN economies.”

The latest reading dovetails with the decline in other major economies, including Vietnam, Japan, Thailand, Taiwan, and the United States (US). South Korea’s industrial production growth also moderated in February 2024.

Malaysia’s key manufacturing sector’s growth slowed to 1.2% in February, versus a 3.7% rise in January. Domestic – oriented industries expanded 3.8% in February, while export – oriented industries turned negative again in February.

“Malaysia stands to gain from the pick-up in external demand and improvement in global manufacturing activities,” MIDF Amanah Investment Bank said. “Firms will also increase production to cope with growing demand from the domestic market.”

MIDF, however, flagged downside risks, including weak growth of major economies such as China and the US, a potential surge in commodity prices, global supply chain disruptions from escalations in geopolitical tensions, and the impact of tight monetary policy on final demand, particularly from the advanced markets.

  • The Edge Markets