Malaysia’s Production Slowed Down

Malaysia industrial production (IP) for March 2023 slowed to 3.1% y/y (February 2023: 3.4% y/y). On a month-on-month basis, IP improved by 8.3% (February 2023: -0.9% m/m), marking the first month of improvement after contracting since December 2022.

By type of industry, the export-oriented industries grew at 3.6% y/y (February 2023: 3.7% y/y), and the domestic-oriented industry grew by 5.0% y/y (February 2023: 7.0% y/y).

Manufacturing and Mining Drive Growth

Production in the manufacturing and the mining sector led the growth, gaining by 4.1% y/y (February 2023: 4.8% y/y) and 0.8% y/y (February 2023: -0.5% y/y, respectively.

Within the manufacturing sector, only production for the electrical and electronic sub-segment improved to 6.4% y/y (February 2023: 5.4% y/y). Other subsegments grew slower including production for food, beverages & tobacco, and transport equipment. More breakdown is depicted in Exhibit 2. Production in electricity declined Production in the electricity sector however, declined by 0.3% y/y (February 2023: 1.1% y/y), mainly due seasonal factors, where demand for electricity tends to be lower during school holidays.

Our Take

We expect slower production going forward based on recent information available. The latest manufacturing PMI as of April 2023 is still under the contractionary level, sustaining the subdued momentum observed since September 2022. The outlook on the global front remains dim as the global economies are dealing with the impact from steep interest rate hikes particularly among global central banks and inflations proven to be stickier than initially expected.

For 1Q2023 GDP numbers that will be officially published this Friday, we expect the growth to be in the range of 4.8 – 5.0%, supported by domestic demand. For the full year 2023, we expect Malaysia’s economy to grow at 4.5%, mainly supported by domestic factors including improving labour market, investment realisation, and improvement in the construction and the agriculture sectors.

Source: AmInvest Research - 10 May 2023