KUALA LUMPUR: Economists have foreseen Malaysia's industrial production index (IPI) to grow faster this year despite February IPI easing to 3.1 percent in February.
MIDF Research said in a note that it maintained its projection that Malaysia's IPI will grow stronger at 3.7 percent this year, as compared to 1.1 percent in 2023.
According to the research house, Malaysia stands to gain from the pickup in external demand and improvement in global manufacturing activities.
Firms will also increase production to cope with growing demand from the domestic market, it said.
Despite optimism that growth will pick up this year, the research house closely monitors several downside risks which could constrain IPI growth this year.
These include the possibility of weak growth in major economies, potential surge in commodity prices and disruptions to the global supply chain from reescalations in geopolitical tensions and the adverse effects of tight monetary policy on final demand, particularly from the advanced markets.
Meanwhile, Kenanga Research said in a note that it continued to believe that Malaysia's manufacturing condition would improve further toward the end of the year, mainly driven by the expected upswing in the technology cycle and China's gradual recovery following a significant stimulus implemented by the country.
Nevertheless, it said the manufacturing condition could experience a sluggish recovery in the near term, as reflected by the latest manufacturing purchasing managers' index reading, which fell to 48.4 in March from 49.5 in February and remained at a contraction level since August 2022.
RHB Research also maintained its optimistic view for Malaysia's manufacturing sector on the back of rosier trade outlook.
The research house observed an improving momentum in Malaysia's IPI year to date.
RHB is also bullish on the prospect of export-oriented industries such as electrical and electronics, petroleum and petroleum-based products, as well as metal goods production amid stronger external demand.
The robust domestic consumption and investment activities in 2024 are also anticipated to support the manufacturing sector, according to RHB.
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