Economics – Malaysia Macro

IP in December continued to expand for the fourth consecutive months supported by manufacturing and electricity.

Outlook for 2022 for the manufacturing sector is positive. Continued healthy external demand that will benefit the export-led manufacturing activities. Also, positive contribution from domestic-led activities with the opening up of the economy, translation from approved foreign direct investment (FDI), firm commodity prices and low base will support growth.

Modest IP Numbers in December

Base case for 2022 GDP is projected at 5.4% with an upside of 6.0%. On the downside, the projected GDP is at 4.5%.

Industrial Production (IP) continued to expand but at moderate growth of 5.8% y/y in December 2021 supported by better performance from manufacturing and electricity.

This brings the full year average growth to 7.4% (-4.4% in 2020) benefiting from low base and improved performance from manufacturing (8.4%) as well as electricity (3.7%) for the full year of 2021, mining declined by 2.5% y/y.

Key Takeaways

Looking into 2022, manufacturing performance is expected to remain healthy. Export-led manufacturing activities such as E&E (2021: 12.2% y/y), chemicals & chemical products (2021: 9.4% y/y), and rubber products (2021: 23.2% y/y) will continue to benefit from global demand.

Besides, domestic-led manufacturing activities will also benefit from the reopening of the economy and now the full opening of the border with effect from March 1, 2022.

Opening up of the border will yield positive impact to the services sector, especially tourism and tourism-related activities. Strong positive spill over effects is envisaged from March 2022 onwards to other economic activities either directly or indirectly.

With greater positive impact on the economy plus contributions from the FDI inflows in the form of expansion and new investments, firm commodity prices as well as low base, outlook for 2022 GDP is projected at 5.4% with and upside of 6.0%.

Downside risk to the domestic economy remains. Much of the impact would come from the external environment. Domestic headwinds such as policy confusion, slow implementation and political noises could weigh on growth. On the downside, the local economy is projected at 4.5%.

Source: AmInvest Research - 9 Feb 2022