KUALA LUMPUR (Jan 11): The country’s industrial production is expected to be on a growth trajectory in 2024, driven by recovery in exports, improved domestic demand and higher private investments.

MIDF Research estimates IPI to grow at 3.7% in 2024, compared with an estimated 1.1% growth in 2023 as more robust global manufacturing activities and a turnaround in the electrical and electronic (E&E) market, resulting in increase in industrial production.

Nevertheless, MIDF Research cautioned that the rise in geopolitical risks and weakening demand in advanced economies because of high interest rates will create uncertainties on the horizon.

RHB Research concurs that IPI growth momentum will pick up in 2024 in tandem with rosier trade prospects and improved investment appetite.

“Our sanguine view is predicated on three key catalysts: improved trade prospects, more signs of recovery in the global technology cycle and robust domestic economic activities,” said RHB Research in the report released on Jan 11.

“We observe more evidence pointing towards a resurgence in exports by 1H2024 (first half of 2024) as outbound shipments have gathered steam since 4Q2023,” RHB Research added.

Higher outbound shipments to key destinations, including China, the US and Singapore is evidence of export recovery, said RHB Research, noting that it has turned positive on the outlook of China in 2024.

“We believe that Malaysia’s export performance will be supported by the recovery in China’s economy in 2024. We opined that Malaysia would be at the forefront to benefit from the recovery in China’s economy as key export products like E&E, machineries and equipment, and other manufactured goods command the lion's share of trade in China’s import demand,” RHB Research commented.

According to RHB Research, firm demand for E&E products will help lift the exports and manufacturing activities in upcoming months.

“The E&E outbound shipments would be bolstered by robust demand for semiconductor and consumer electrical and electronics products amidst the re-acceleration of the global technology cycle. We continue to see higher E&E exports for Malaysia and regional Asean economies in recent months and the uptrend in global semiconductor sales,” they noted.

On top of that, RHB Research said higher domestic consumption and investment activities by 2024 are anticipated to support the manufacturing sector.

“Investment appetite is improving, as indicated by higher capital goods imports and robust capital formation.

“Further upsides on investment activities would emanate from business-friendly policies and incentives focusing on priority sectors like technology, tourism and agriculture, as well as those with export capacity coupled with the continuation of major infrastructure projects,” they said.

Meanwhile, consumer spending is expected to increase in 2024 amid a tighter labour market and improved consumer sentiment, it added.

In a statement on Thursday, Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin of the Department of Statistics Malaysia (DOSM) said Malaysia's IPI registered a marginal increase of 0.6% year-on-year in November 2023, supported by modest expansion of 1.9% in the mining segment and 4.2% in the electricity sector.

However, he said the manufacturing sector output shrank 0.1% after two consecutive months of growth.

On a month-on-month comparison, Mohd Uzir said the IPI contracted 0.9% compared to 1.9% growth in October.

“The decrease in manufacturing output was due to lower output production in the export-oriented industries, which dropped by 2.7%.

“The contraction was mainly attributable to a fall in the manufacture of computer, electronics and optical products (-8.6%), manufacture of coke and refined petroleum products (-1.8%), and manufacture of wood and products of wood and cork (-1.9%),” he said.

Mohd Uzir said the performance was in line with the country’s export performance, which had been trending downward since March 2023 and recorded negative 5.9% in November.

The domestic-oriented industries remained resilient by registering an increase of 5.8% in November, boosted mainly by a 10.9% increase in the manufacture of food processing products, followed by manufacture of fabricated metal products, except machinery and equipment, which was 8.9% higher, and manufacture of other non-metallic mineral products, up 6.9%.

For the 11-month performance, Mohd Uzir said the IPI rose at a slower rate of 1% compared with 7.1% in the same period in 2022.

Globally, MIDF Research said global manufacturing activities still contracted although the global manufacturing purchase managers index (PMI) increased to 49.3 in Nov 2023 compared with 48.8 in Oct 2023.

Overall, the research house said IPI performance was mixed in selected countries in Nov 2023, with Taiwan, Japan, Thailand and Singapore reporting IPI growth moderating, while South Korea and the Philippines reported stronger IPI growth.

Going forward, MIDF Research expects the performance in December 2023 to be in line with the pattern in November as the global manufacturing PMI fell to 49.

"But we noticed PMI surveys for several countries reported stabilisation in demand from overseas and export markets," it added.