Malaysia’s IPI growth forecast lowered to 2.2% by MIDF Research

MIDF Research has revised down its forecast for Malaysia’s Industrial Production Index (IPI) growth in 2023 to 2.2% from 3.5% initially due to the ongoing sluggishness in global trade performance.

“We foresee the continuous robustness in domestic demand to continue supporting domestic-driven sectors but trade-oriented sectors will continue to tread cautiously due to sluggish overseas demand.

“With external factors continuing to pose downside risks, we are closely monitoring the development of China’s economic recovery and the trend in global inflation.,” the research firm said in a report today.

However, there is a glimmer of hope for improved trade performance in the latter half of the year.

It said recent developments, such as subsiding global inflation and central banks adopting a less hawkish stance, provide some optimism.

These factors, it said,  could potentially contribute to better trade performance in the late second half of 2023.

May 2023 witnessed a positive development in Malaysia’s IPI performance, with a year-on-year growth rate of 4.7%.

Although Malaysia’s IPI showed improvement in May 2023, with a significant rebound in manufacturing output and increased electricity generation, the outlook for export-oriented production remains constrained by subdued external demand. Conversely, domestically oriented production is expected to benefit from sustained growth in domestic spending activities.

However, the global manufacturing PMI indicates a persistent contraction in global manufacturing activities, underscoring the challenges faced by Malaysia’s trade-oriented sectors due to weak external demand.