KUALA LUMPUR: MIDF Amanah Investment Bank has maintained its Industrial Production Index (IPI) growth forecast of 4.3 per cent this year on the back of sustained expansion in external demand and growing domestic spending.
It said the diminishing low base effect, however, would bring the pace of IPI growth to a more normal level.
“Looking at the increase in manufacturing PMI (Purchasing Managers’ Index) to 50.9 in February 2022 from 50.5 in January 2022, we expect manufacturing activities will continue to grow although businesses are facing challenges from rising production costs given higher input prices and other supply constraints,” it said in a research note today.
The investment bank said the recent military operations by Russia on Ukraine also resulted in a broad increase in global commodity prices and heightened concerns over shortages of materials and prolonged disruption in the global supply chain.
Despite these concerns, it said Malaysia is expected to gain from the high prices, particularly oil and gas as well as palm oil.
Moreover, it said the rising demand for electrical and electronic products would continue to support Malaysia’s trade and production activities this year.
“In addition, we opine that the government’s decision to reopen international borders will allow production activities to pick up in certain sectors such as construction and plantation.
“Domestic-oriented sectors will also benefit from the economic reopening and improving domestic demand,” it said.
The data from the Department of Statistics Malaysia released earlier showed that IPI grew at a moderate growth of 4.3 per cent year-on-year (y-o-y) in January 2022 from 5.9 per cent y-o-y in the previous month.
The expansion of IPI was contributed by the increment of 6.8 per cent in the manufacturing index and 7.7 per cent in the electricity index despite the mining index recording a decline of 5.1 per cent. - Bernama