“Despite the projected positive growth, we remain cautious that the outlook can be weaker than anticipated, considering IPI growth having slowed to 1.3% year-on-year (y-o-y) in the first half of 2023 (H1 2023) versus 5.4% y-o-y in H2 2022, which was closely linked to the weaker output in mining and export-oriented sectors.

“On that note, we foresee weak external demand and global manufacturing activities will continue to affect the IPI outlook,” it said in a research note today.

However, MIDF opined that resilience in domestic demand would continue to lend support to the overall demand outlook this year.

“Although easing cost pressure and better supply condition would result in less disruptions to the stability of supply, several risks may constrain production outlook, such as the more significant decline in external demand, elevated inflation, and renewed rise in the cost of production,” it said.

The research house noted Malaysia’s IPI growth weakened more than expected in June this year, contracting by 2.2% y-o-y from a growth of 4.8% y-o-y in May because of reduced output in the mining and manufacturing sectors.

It said the pace of decline was sharper than the market forecast.

The mining output dropped by 6.4% y-o-y as production for both crude petroleum and natural gas declined during the month, while the manufacturing output fell by 1.6% y-o-y due to a reduction in export-oriented output such as refined petroleum, rubber products, computer and peripherals equipment, and machinery and equipment, it added.