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Higher risks for Malaysia economy as manufacturing PMI slides
KUALA LUMPUR, Malaysia (Sin Chew Daily/ANN) – Malaysia’s Nikkei Purchasing Manager’s Index has been down for three consecutive months and remains below entrepreneurs’ confidence threshold since October 2018.
x While the second quarter of the economy is expected to maintain 4.5% of growth rate achieved in first quarter, the risk of a slowdown in economy for third quarter has increased.
Malaysia’s Manufacturing Purchasing Manager’s Index (PMI) is down for three consecutive months. Since Oct 2018 the reading has been below the entrepreneurs’ confidence threshold. Economists hold the view that despite the economy in second quarter is likely to be able to match the growth rate of 4.5% in first quarter, the risk of economy slowdown in third quarter has increased.
Malaysia’s Nikkei Manufacturing PMI deteriorated further to 47.6 in July, signalling the worsening of manufacturing sector. Manufacturing operators face a tough business environment due to weakening of demand which leads to pressure in production. This has also affected job recruitment. Although orders from US, Japan and Turkey have increased, due to stiff competition, demand remains challenging. The manufacturing industry in Malaysia may not be receiving more orders due to slowdown in global economy and geopolitical tension.
Manufacturers are optimistic on new projects, expansion plan and aggressive marketing to help stimulate business growth.
The ASEAN Manufacturing PMI dropped too, from 49.7 in June to 49.5 in July, the lowest since July 2017. Apart from Malaysia, situation in Thailand and Indonesia turned worse. Thailand’s PMI dropped from 50.6 to 50.3, Indonesia from 50.6 to 49.6. Vietnam’s PMI rose from 52.5 to 52.6 and Philippines 51.3 to 52.1.
The AmInvestment Bank pointed out that the latest PMI figures showed a possibility of economic growth in third quarter lower than second quarter. But the current PMI figures likely helped gross domestic product (GDP) growth to maintain at 4.5% which was in line with the bank’s forecast.
“We are more concerned with not seeing any sign of manufacturing sector showing rebound worldwide. The risk of economy sliding down further still exists. Based on our estimates, economic growth may be slowed down to 4% under the worst scenario,’’ said the bank.
Kenanga Research said it supported the cautious but optimistic outlook on PMI by as it is still unknown whether the US-China agreement will be finalised in short term. This the external risks had increased.
“On the whole the export market has slowed down and domestic demand is expected to be weak too. We foresee GDP growth in 2019 will be reduced to 4.5%, lower than 4.7% last year,’’ it said.
Affin Research holds the view that regional and global market demand remain unclear due to trade war. Domestic demand in Malaysia remains strong and stable and the second quarter of economy is expected to remain between 4.3% and 4.5% in growth rate. Economic growth for 2019 is likely to be 4.5%.
Source: https://elevenmyanmar.com/news/higher-risks-for-malaysia-economy-as-manufacturing-pmi-slides