Thailand
Malaysia: IPI to remain subdued in Q4
PETALING JAYA: Industrial production is anticipated to remain lacklustre in the fourth quarter this year due to the resurgence of Covid-19 that has forced the re-implementation of city lockdowns in most major economies, said AllianceDBS Research.
It projected that the Industrial Production Index (IPI) will decline 5.8% year-on-year (y-o-y) by end-2020 as compared to a 2.3% growth in 2019.
The research house said industry players remained cautious and experienced lacklustre production levels amid the unresolved pandemic. “This indicates that the economic recovery had lost its momentum due to the recent resurgence of Covid-19 cases domestically and globally, ” it said in a report.
In October, Malaysia’s IPI contracted by 0.5% y-o-y after registering positive growth for three consecutive months since July, mainly driven by the moderation in the manufacturing sector.
This was weaker than the Bloomberg consensus growth estimate of 0.2% y-o-y.
On a month-on-month (m-o-m) basis, IPI expanded 1.7% in October, mainly driven by the recovery in mining and electricity production that both rebounded 7.6% m-o-m and 4.1% m-o-m respectively.
Public Investment Bank Research said Covid-19 infections may reach its peak in the first quarter next year before gradually easing, driven by improving weather conditions and the start of mass Covid-19 inoculations globally by then.
“Industrial activities are therefore expected to turn around in full force in the second half of 2021.
“IPI may still be weighed by a sluggish mining component, however, with the Opec+ supply cut agreement lasting until the second quarter next year.
“Note that Opec+ may want to normalise its output to pre-pandemic levels gradually post-supply cut agreement in the second quarter of 2021, ” it said, adding that this may follow through well into 2022, as Opec+ may not want to put undue pressure on prices.
The research house said the IPI would remain supported by the domestic market amid soft external demand that would continue well into the first half of 2021.
Kenanga Research said the reinstatement of anti-Covid-19 measures globally due to the ongoing resurgence of infections could hinder production activities and reduce external demand.
However, it said the rapid development in the global energy demand due to the vaccine optimism may provide some support to the industrial sector.
Source: https://www.thestar.com.my/business/business-news/2020/12/15/ipi-to-remain-subdued-in-q4