Malaysia: Industrial production growth expected to normalise
PETALING JAYA: Malaysia’s industrial production growth is expected to normalise in 2023 on the back of a dampened outlook among the country’s major trading partners, like the United States, United Kingdom and Europe, says AmBank Research.
“Moving forward, we expect growth in production to slow down. The latest manufacturing Purchasing Managers’ Index number also has been on the downward trend throughout the second half of 2022,” said the research house in a report yesterday.
Nevertheless, AmBank Research is optimistic the reopening of China’s economy can boost the global and local economy as 15% of Malaysia’s exports go to China.
According to the statistics released by the Statistics Department yesterday, the industrial production index (IPI) for November 2022 rose by 4.8% year-on-year (y-o-y) on expansion in the manufacturing and electricity sectors which surged by 4.8% and 1.2% y-o-y respectively.
On the other hand, the mining sector saw a sharp contraction to 6.1% from 8.5% in October, due to lower production in both crude oil and condensate as well as natural gas.
On a whole, IPI for the manufacturing sector rebounded to 0.7% in November from minus 1.8% in October 2022. The electrical and electronic sector continues to be the main growth catalyst for the manufacturing sector.
Other sectors like the food and beverage, tobacco, transport equipment and other manufactures subsectors also contributed to the growth.
Moreover, export-oriented industries have increased by 5.1% led by the manufacture of computers, electronics and optical products, as well as chemicals and chemical products.
Domestic-oriented industries expanded by 4.3% in November underpinned by the production of food processing products, motor vehicles, trailers and semi-trailers.
AmBank Research noted distributive trade sales are on a decline to 13.9% y-o-y in November from 14.9% y-o-y in October.
While wholesale and retail have slowed down to 5.6% and 22.8% y-o-y respectively, motor vehicle sales are still on an uptrend, having increased by 17.2% y-o-y in November.
“Despite the unemployment rate staying at 3.6%, which is the lowest level since the pandemic, wage growth in key sectors, including the manufacturing and the services sector have been tapering down which could explain slower growth in the wholesale and retail segments over the same period,” said the research house.
AmBank Research added the school holidays and festive seasons in December 2022 and in the first quarter of financial year 2023 (1Q23) could boost the growth of distributive sales.
However, growth is not expected to be the same for all components within the wholesale and retail trade.
“Our preliminary estimate shows gross domestic product for 4Q22 would hover around 6.5% to 7% which is slower than the 3Q22 gross domestic product (GDP) growth of 14.2% but such a situation is not unexpected as favourable base effect dissipates.
“We maintain our 2022 GDP growth between 8.5% and 9%, and 4.5% for 2023,” said the research house.