Industrial production (IP) in June rose at a slower pace of 1.4% y/y (May: 26.1% y/y), mainly underpinned by the mining sector (10.3% y/y) while manufacturing (-0.2% y/y) was supported by export-led activities with domestic activities affected by the lockdown measures. Electricity (-4.8% y/y) was also weak in June.

With 2Q IP averaging at 25.9% y/y (1Q21: 4.0% y/y) and exports at 44.0% y/y (1Q21: 18.0% y/y) plus a low base, 2Q GDP should turn around from the negative growth trajectory for the past four quarters for the first time. 2Q GDP is likely to hover around 11%–13%. For now, we maintain the 4.0–4.5% GDP outlook for 2021.

A. Highlights

• Industrial production (IP) in June rose at a slower pace at 1.4% y/y (May: 26.1% y/y), mainly underpinned by the mining sector (10.3% y/y) while manufacturing (-0.2% y/y) was supported by export-led activities with domestic activities affected by the lockdown measures. Electricity (-4.8% y/y) was also weak in June.

• Looking at the manufacturing sector, it primarily benefited from the export-led activities as it climbed 8.7% y/y (25.3% y/y in May). Positive contributions from semiconductors, medical-related and resource-based activities also supported this segment.

• Domestic-oriented manufacturing industries plunged 20.8% y/y in June (+38.8% y/y in May). It was primarily dragged by MCO 3.0 and the strict SOPs.

B. Key Takeaways

• With 2Q IP averaging at 25.9% y/y (1Q21: 4.0% y/y) and exports at 44.0% y/y (1Q21: 18.0% y/y), these suggest that 2Q GDP should turn around from the negative growth trajectory for the past four quarters for the first time.

• Besides, the low base provides a big lift to GDP growth. 2Q GDP is likely to hover around the 11%–13% range.

• The outlook for 2H21 will depend on the vaccination speed, management of Covid cases, reopening of the economy, stimulus measures and domestic stability. For now, we maintain the 4.0–4.5% GDP outlook for 2021.

Source: AmInvest Research - 11 Aug 2021