PETALING JAYA: Malaysia’s industrial production index (IPI), a gauge measuring factory output, is expected to remain expansionary albeit at a slower pace going into 2025 on steady economic growth amid rising geopolitical tensions.
Analysts remain optimistic that the country’s industrial production would continue to be expansionary supported by an economy fuelled by steady domestic spending and sustained exports growth.
TA Research said the country’s industrial production performance would be contingent on President-elect Donald Trump’s trade and economic policies amid the broader global economic conditions.
“If he reinstates or intensifies previous protectionist measures, such as tariffs on Chinese goods or trade restrictions affecting other key economies, global trade flows could be disrupted. Given Malaysia’s status as an export-driven economy, this could lead to reduced demand for its manufactured goods, negatively impacting industrial production,” it said.
Noting that Malaysia’s IPI trajectory trended downwards during most of the first Trump presidency points to potential vulnerabilities, it also highlights areas where the country’s industrial base can adapt to global shifts.
Kenanga Research expects the IPI’s key manufacturing sub-index to pick up in the fourth quarter of 2024 backed by steady demand for electrical and electronics goods and sustained domestic demand despite the sub-index slowing to a six-month low in September.
The Statistics Department released IPI figures on Nov 8 showing weakening factory output growth of 2.3% for September 2024 compared to 4.1% in the previous month weighed down by a broad-based slowdown across all sub-indices. The market consensus was for IPI to grow 3.5%.
Hong Leong Investment Bank Research, which has maintained Malaysia’s gross domestic product (GDP) forecast at 5.0% for 2024, said despite the bumpy manufacturing outlook, it expects the country’s industrial production to remain expansionary, supported by steady domestic spending.
CIMB Research has revised its 2024 IPI growth estimate to 4.0% from 4.3% after the gauge’s slowdown in recent months but maintained GDP forecasts at 5.2% for this year (government projects GDP of 4.8% to 5.3%) and 5% (government projects GDP of 4.5% to 5.5%) for next on sustained growth in the services sector.
The research house said GDP growth projections also reflected reflects “sustained recovery in external demand supported by the global tech upcycle, alongside strong domestic spending driven by robust investments and resilient consumer spending”.
