Malaysia's IPI likely to grow at 2.9% in 2019 — MIDF

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KUALA LUMPUR (Jan 11): Malaysia’s Industrial Production Index (IPI) is expected to grow 2.9 percent in 2019, mainly driven by the services and manufacturing sectors.

MIDF Research said the mining sector would likely see a modest recovery early this year.

Based on data from its recent Business Tendency Survey, the research house said IPI growth was forecast between three and four per cent during the first half of 2019.

“We opine the continuous uptrend in both wages and employment in the manufacturing provides a bright outlook for the economic activities and contribute positively towards domestic consumption in 2019,” it said in a research note today.

In addition to upbeat domestic demand, MIDF said steady external trade performance, lower business cost partly due to moderating inflation and stable retail fuel prices, would also boost industrial production growth in 2019.

It also expects a gradual rebound and pick-up in global IPI, given the US and China are progressing towards a trade deal and Brent oil price is on a recovery path and neared US$60 per barrel.

"On top of that, domestic economic activity in major economies such as the US, European Union and China remained steady as the jobless rate in each economy stayed at a low level, hence supporting global demand and trade activities,” it said.

Nevertheless, MIDF Research said headwinds from global trade tension and supply disruption for commodities-based sectors could pose as downside risks to the estimate on Malaysia’s IPI growth.

In November 2018, it said the country’s IPI expanded at 2.5% and above the market estimate of 2.3% and its forecast of 2.4%.

“The IPI performance is in tandem with the modest pace of Malaysia’s external trade in November 2018.

“Malaysia’s total exports growth in November fell to a three-month low of 1.6 per cent year-on year, while domestic exports contracted 2.6 per cent,” it said.

MIDF said exports of electrical and electronic (E&E) products, which constituted about 37% of total exports, plunged to a two-year low.

“It is the first contraction since March 2018 and the lowest since August 2016 for the outbound shipments of E&E products. On the other hand, production of natural gas fell 1.8 per cent, pushing down mining output for the month,” it added.